Port Wings News Network:
Tirupur Exporters’ Association (TEA) on 18 May 2020 requested the Government for extension of moratorium for three months period (that was announced on 24 March 2020 and expiring on 31 May 2020) as there was no industrial activity happening.
In a media statement, Shri Raja M Shanmugam, President, TEA, said the Finance Minister’s announcement on extension of moratorium for three months period on 24th March 2020 is expiring on 31st May 2020 and as there was no industrial activity happening till 6 May 2020 and thereafter, only with less capacity, industry is operating in the lockdown period up to 31st May 2020. He requested the Prime Minister to advice for extension of moratorium for another nine months for MSMEs.
Below is the reproduction of memorandum sent to the Prime Minister’s Office:
We would like to thank the Hon’ble Prime Minister for taking various measures to contain the spread of COVID – 19 pandemic and protecting the industries.
The regular steps being taken by the Hon’ble Prime Minister in this connection is well appreciated by all global countries and we are also thankful for the announcement of Rs.20 Lakh Crores financial measures, 10% of GDP, to lift the economy and protect the people in all walks of life.
TERM LOAN MORATORIUM
To tide over the economic fallout from COVID-19, the Hon’ble Finance Minister announced financial relief measures on 24th March 2020 and subsequently, RBI issued a press release permitting to allow a moratorium of three months on payment of installments in respect of all term loans outstanding as on March 1, 2020.
WORKING CAPITAL MORATORIUM
In respect of working capital facilities sanctioned in the form of cash credit/overdraft, lending institutions are being permitted to allow a deferment of three months on payment of interest in respect of all such facilities outstanding as on March 1, 2020.
The accumulated interest for the period will be paid after the expiry of the deferment period. Our concern is that the moratorium of three months period will get expired by 31st May 2020 and the commencement of repayment starts by 1st June 2020, including the compounded interest calculated for the moratorium period.
The Government has now declared a supportive financial measure for MSMEs by granting 20% additional working capital to ease of the liquidity. Sir, the lockdown period has been now extended till 31st May 2020 and we would like to drive home the point that for the past two months, the industries have not been permitted to operate and moreover, if we take into account the global market closure date also, it would be actually three months. More importantly, the leading global retail stores would reopen only from June onwards and place the orders gradually, that too in an increment manner only.
Without having any activities and the house totally in disorder, the MSMEs could not repay the interest and principal, with this background, we strongly feel that the revival of MSMEs would happen only after another six months, by addressing the issues one by one.
In view of this, we request to extend the moratorium on servicing of interest and principal by another nine months to MSMEs.
NON-MSMEs (Not Big Corporates)
The Non-MSME units which could be categorized just above the MSME category, but not in the league of big corporates like Reliance Industries, Grasim Industries etc., have also been facing the liquidity crisis and these units certainly need the support of Government to tide over the crisis. Therefore, we request for extension of the moratorium on servicing of interest and principal at least by three to six months.
RESTRUCTURING OF DEBT
These highly leverage but functional units are severely impacted requiring to go for restructuring of their debt portfolio in this unprecedented situation. In order to enable those units to come out of crisis, a one time ‘Restructuring of debt’ option should be made available to all those who are in need. This restructuring should not result in asset downgrade resulting in Units classified as NPA – rather this should be announced as a ‘Hand holding’ opportunity to the otherwise performing units but that are stressed due to this COVID situation.
Considering the gravity of the issue, we request the Hon’ble Prime Minister to kindly advice to announce the extension of moratorium for both MSMEs and Non-MSMEs (not in corporate league), which will be immensely helpful to get envisaged revival in post COVID-19 and to restore normalcy.
Raja M Shanmugham