Increasing number of MSMEs in Coimbatore turn to money lenders and NBFCs for loans
'We have raised this issue at the bankers' meeting. The Micro, Small and Medium-scale Enterprises (MSMEs), especially the micro and cottage enterprises, find it difficult to comply with the CIBIL score norm. These norms should be relaxed. Further, banks take time to sanction funds. These issues should be addressed,' said an official in Coimbatore.
According to J. James, president of the Tamil Nadu Association of Cottage and Tiny Enterprises (TACT), while 30 % of the micro units take loans from nationalised banks, another 30 % get it from private banks. The remaining units go to NBFCs. If the unit is unable to repay on time, they run into serious issues and we are unable to help them,' he said.
It is difficult for the micro units that do not work on job orders to maintain records. Hence, they are unable to comply with the CIBIL norms, he said.
President of the Coimbatore Tiruppur District Cottage and Micro Enterprises' Association C. Sivakumar said the industries do not have to submit collaterals when they take loans from NBFCs. Further, the loans are sanctioned within a day. In the case of banks, it takes at least a month. However, the units pay 20 % to 28 % interest. 'It is not possible for any MSME unit to operate the unit after paying such high interests for loans. So, they start failing to pay the interest and get into trouble. There are several instances where the money lenders or NBFCs have take possession of the assets of the units that have failed to repay,' he said.
Further, there are several middlemen who promise loans, taking over of default loans, etc and push the micro units into deeper troubles, he added.
The banks need to be pro-active and support the micro industries more by relaxing the loan norms, they added.
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