Close on the heels of the Union Budget proposal on a five percentage point cut in corporate tax to 25 per cent for businesses with a turnover of up to Rs 50 crore, State Bank of India (SBI), which accounts for almost half of the banking sector’s SME portfolio, said it is working on a scheme to bail out good small and medium units (SMEs) which are facing issues relating to demonetisation and slowdown in the economy.

“We are working on the modalities of the scheme for SMEs with turnover up to Rs 25 crore. The scheme will be applicable to SMEs which were making profits and now finding it difficult to service their loan repayment or payment schedules,” SBI Managing Director Rajnish Kumar said.

“We have a huge SME loan portfolio. We will help genuine SMEs which are finding the current environment tough. We have over one million SME customer base,” Kumar told.

According to figures available with the Reserve Bank of India, SBI accounts for half — close to Rs 1,70,000 crore — of the total SME portfolio of Rs 3,43,600 crore of the entire banking sector. “Once SBI announces the scheme, others may also come out with their plans,” said the former chairman of a nationalised bank.

“Our scheme is different. It has nothing to do with the RBI’s latest scheme or the Budget proposal,” Kumar said. In a big relief to the banking sector and SME units, the Reserve Bank had last month relaxed the norms for bad loan classification for small borrowers, including farmers, who are reeling under the impact of demonetisation.

The RBI has given small borrowers additional 30 days to repay, over and above the 60 days extended repayment period announced last month. This relief applies to dues payable between November 1 and December 31, 2016 — the period when demonetisation impacted small borrowers.

“Our scheme to help small units will consider various options to aid the small units. Many of them were facing genuine problems,” Kumar said.

However, he didn’t give details of the number of units which will benefit from the scheme. Many small borrowers had approached the banks and the RBI for relief in view of the currency crunch and restrictions on withdrawal of cash from ATMs and banks. Further, demand for goods also came down after demonetisation and many units have either shut shop or are on the verge of closing down. Though the RBI has lifted the withdrawal limits on the current account, Rs 24,000 weekly restriction is still applicable on savings bank accounts.

“Demonetisation can put pressure on NPAs especially for SMEs whose turnover has been affected … This needs to be monitored closely by banks,” said Care Ratings.

“The demonetisation drive has impacted nearly 70 per cent of businessmen in the country’s financial capital of Mumbai and the manufacturing hub of Pune along with nearby areas. ..,” an SBI research report said recently.

Source: The Indian Express