While Centre’s decision to extend collateral-free MSME loans to 26 stressed sectors has been met with praise, the Tamil Nadu government has gone one step further in order to ease the burden on MSMEs.
The state government has decided to waive off stamp duty applicable on sanctioning of these loans.
According to government data, more than Rs 7,000 crore worth of collateral-free loans have been sanctioned by various banks to 3.5 lakh MSME units in the state. However, only 1.6 lakh units have received any money in their accounts as of mid-September, amounting to a total disbursement of Rs 4,383 crore.
"Banks took a little time to communicate this message to branches that this scheme is guaranteed by the government as a collateral-free loan, and it needs to be disbursed based on the application of the borrower and not collateral, stock or anything else," said M Balachandran, President of the Ambattur Industrial Estate Manufacturers’ Association.
MSME associations say one of the other reasons for this lag includes lack of manpower at bank branches, lower-than-ideal credit history of smaller companies, and the failure to produce renewed memorandums of deposit or MODs while availing these loans.
Will the waiver help?
It is understood that the state government’s waiver on stamp duty charges towards the loans was done in order to provide relief. The government has also allowed MSMEs to not renew their MODs while availing these loans. Companies say the waiver though a little late could still result in significant savings.
"Most of us have filed MODs; we have complied with the requirements; we have paid the charges. Our administrative cost of the loan is pretty high,” said R Srikanth, convenor, MSME Panel, CII.
“Now, with the government waiving this off, up to RS 25,000 is the benefit that is accrued to whoever goes in for the loan, now."
The stamp duty waiver may be good news for MSMEs, but the cheer may not last. With Diwali gone, concerns about dimming consumer sentiment have resurfaced and experts say that MSMEs, when faced with fresh uncertainty over business outlook, could be more circumspect about borrowing. In such a situation, they say, fiscal treats like stamp duty waivers might not mean much.