Bankers Told To Ask Big Companies To Clear Their Dues Of Small Companies

  This refers to news items published today “Banks should exert their influence over big companies to settle their dues to small and medium enterprises (SMEs) on time,” This is the desire of  Uma Shankar, Regional Director, Reserve Bank of India (RBI).(news given below )

Banks are facing the crisis created by rise in bad assets which is due to non repayment of dues by borrowers. Now government through Uma Shankar, Regional Director, Reserve Bank of India (RBI) is suggesting banks to impress upon and to build pressure  on big companies to pay their dues to SMEs in times. It further pleads that SMEs do not have muscle powers to force big companies to pay their dues to small and medium enterprises. 

Does RBI think or do RBI officials wonder in dreamland that they are of the view that bankers are having muscle powers to recover their dues from big defaulters?

Not to speak of  influencing big companies to repay dues of smaller companies,it is good to mention here that banks are not in a position or you may say in a pathetic situation to recover their own dues from NPA borrowers or from restructured borrowers which involves roughly two lac crore of rupees and four lac crore rupees respectively.RBI is trying to sprinkle salt on wounds of bankers who are facing torture for less recovery from their defaulters.

Even police officials and administrative officials who are having huge muscle power and man power in their control are unable to recover billions of rupees from IT defaulters, Bank loan defaulters and other tax defaulters.

This is India where defaulters, criminals and fraudulent officers are holding key posts and where criminals are sitting in Parliament .It will be foolish to expect any cruel action against criminals. It is rather possible to torture person like Khemka or Durga Nagpal in all banks and in all departments run by state or central government. This is India where criminals are more assertive and effective in deciding the movements and actions of police officials and court officials and this is why good persons are afraid of knocking the door of police or court for getting justice.

In such position, It is fully ridiculous and great fun to expect from bank officials to help small and medium enterprises SMEs in getting their dues from big companies because bankers themselves are in pathetic position, they themselves are begging with folded hand before defaulters to repay bank's dues. 

Bankers are spending money on bureaucrats and police officials to recover the money from selective few big defaulters. When they fail to motivate defaulters with folded hands they think it wise to compromise with defaulters sacrificing hard earned interest income or even principals or finally write off the entire dues. This is why total of annual write off and sacrifice by bank in fraud and NPA accounts is far more than what is recovered by bank from defaulters and fraud masters.

Bank officers are unable to sleep these days because they are being tortured by their bosses to achieve the unachievable recovery target to face the music of transfers and face punitive actions. Bosses in banks are not ready to listen whether a branch is having adequate manpower to attend to normal customer services and to safeguard even existing assets. Majority of branches do not have time to even monitor existing advances, but they are told to disburse more and more loans rightly or wrongly to achieve target fixed for advances.

Majority of bank officers go home only for sleeping; they do not have time even to talk to their family members. BY the time officer reach home in late night their children go to bed. And surprising, RBI expects bankers that they will make effort to recover dues from big companies on behalf of small firms coming under SME sector.

It will be a great luck and great obligation to their organization if bank officials  are able to at least ensure quality lending so that further slippages may be reduced and it will be great miracle if they are able to recover bank's dues from recalcitrant and willful defaulters of the bank, not to speak of bankers telling big companies to clear their dues of SMEs. I hope RBI will come to senses and talk what is practically possible and not only preach sermons like politicians.

However it may be added here that Bank officials instead of recovering dues of small companies from bigger companies are financing fresh loan on sundry debtors of small or big companies to increase their loan portfolio and thus inviting greater problem for banks as well as investors and customers and staff of the bank.I wish to make it more clear that banks use to assess drawing power of a borrower on the basis of stock and sundry debtors where majority of debtors are unerecoverable from banks.

I would not hesitate in saying that bankers are rather digging their own grave by financing on sundry debtors of their borrowers instead of financing only on stock and based on real prime and real collateral securities . In a mad rush to sanction more and more loan bankers think it wise to calculate Permissible Bank Finance for a loan seeking company or trader on 75 to 80 percent of total of stock and sundry debtors of a company shown in their books of accounts.

 It is further true that majority of sundry debtors in balance sheet of a company are unrecoverable or in the name of their own sister companies.It means to say that there is complete debt trap in which companies and bank as also our clever government is getting trapped and they altogether are adding fuel to fire in which banks and the country is already burning.

 ‘Banks should exert influence to help SMEs get their dues’=Business Line

BANGALORE, SEPT. 26:  

“Banks should exert their influence over big companies to settle their dues to small and medium enterprises (SMEs) on time,” said Uma Shankar, Regional Director, Reserve Bank of India (RBI).

Addressing the ‘SME CEO Knowledge Forum’ sponsored by UTI Mutual Fund, in association with The Hindu Business Line and SIDBI and KPMG as knowledge partners, Uma Shankar pointed out that SMEs have no muscle power to tell big companies to pay on time or a voice to tell them to pay their dues on time. “It is here the banks should step in to help them for their survival.”

She pointed out that most SMEs are a ‘one-man-show’ units and they face hindrances such as lack of manpower, lack of ability to market products, prepare financial statements, adhere to norms or get technical support or know-how. Also, these SMEs lack resources to advertise their products or have constraints in getting funds.

Uma Shankar said several institutions such as SIDBI (Small Industries Development Bank of India) have been set up in the country to help SME units/entrepreneurs, while commercial banks have been specifically instructed to set aside some portion of lending to the SMEs.

She also advised SMEs that after getting financial assistance, they should adhere to fiscal discipline in their daily business functioning so that the repayment schedule is not violated.

They should also prepare financial statements according to ICAI norms, and internally they should seek the co-operation of their employees to adhere to production timelines and quality.

Bharath L. Ghia, Country Head, SME & Distribution Channel of UTI Mutual Fund, said SMEs should explore the option of investing in mutual funds which provide better returns. B.P. Shashidar, President of Kassia (Karnataka Small Scale Industries Association), said from his experience, operating a small unit was not an easy task. “It is a mix of risk, tension, pressure, anxiety, progress, thrill and satisfaction too as they contribute to the society at large.”

Ram Nath, Chief General Manager, SIDBI, said SMEs should stop asking for subsidies and instead seek competitive rates.

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