The State level Inter Institutional Committee (SlIIC) is a State subject. Promoted by the RBI, SlIIC meetings are convened periodically to address problems of MSMEs, mostly finance-related issues. But, it can also address other issues like electricity, sales tax and licencing problems etc. SlIIC meetings are attended by the Regional Director RBI of the State, the concerned bankers and other relevant authorities. Chaired by the Secretary, Industries of the State, decisions are made to rehabilitate the industry by resolving the causes of sickness.
The SlIIC was formed mainly to rehabilitate potentially viable sick MSMEs. It operates in every State. The DIC (District Industry Centre) collects applications for presenting in the Sub-SlIIC which is a district level forum to resolve the difficulties faced by the industry. In case the intervention of State authorities is required, the matter is forwarded for decision making at SlIIC.
It is a parallel body to BIFR (Board for Industrial Finance and Restructuring) which is responsible for dealing with industrial sickness mostly for medium and large scale industries. While BIFR is a court, vested with statutory powers, SlIIC has no such authority. SlIIC can only recommend, but the recommendation of SlIIC is not mandatory for either bank or any other agency to follow. Hence, the decision of SlIIC is not binding. Thus, gradually with time, SlIIC has been almost defunct. Even when meetings are held periodically, in some States, it doesn’t yield any results. The industrial sickness, thus, continues unmitigated.
MSMEs have no other forum to redress their grievances, especially, pertaining to their financial needs which are major causes of sickness of MSMEs. While for issues like under financing, delayed financing or piecemeal financing, the unit has to approach the same financer for additional funds, which have been already refused by them, there is a need for an independent body that can adjudicate and resolve the issue rightfully.
From the bankers’ point of view, rehabilitating/restructuring an MSME unit is certainly a risky proposition which has also been proved since most restructuring has failed subsequently. In such cases, a banker is subjected to harsh inquiry.
They have to abide by the guidelines of RBI and the norms fixed by their own bank, the violation of which attracts penal provisions. Hence, it is but natural that a banker prima facie avoids restructuring of a stressed account or an NPA account.
Provided a forum like SlIIC recommends restructuring of a stressed/NPA account, and when the SlIIC is vested with statutory powers, on the basis of the recommendation of the committee, it becomes easier decision-making for the banker to implement the recommendation. The onus thus lies on the committee and individually the banker is not held responsible at a later date even if the restructuring fails.
Conversely, it can be noticed that stressed/ NPA accounts referred to by BIFR are implemented freely by the bankers and the other agencies since the order of BIFR is binding on them. It is estimated that bad loans may jump to 10.1 per cent by March 2017. Out of this, 701 NPA accounts are above Rs 100 crore, amounting to Rs 1.6 lakh crore only in the public sector banks. It is obvious that such accounts are for large scale and the MSME share of bad loan is estimated to be below 15 per cent.
While considering the significance of the MSME, which is a link between the large scale sector and the agriculture sector, RBI Deputy Governor R Gandhi said on August 17 in the FICCI banking summit, that the MSME sector has been overlooked by formal financial institutions, not only in India but also across the globe. He said that MSMEs reportedly account for more than half of the world’s gross domestic products (GDP) and employ almost 2/3rd of the global workforce.
However, they are the neglected lot world over as reported by international Finance Corporations (IFC), funding gap of more than USD 2 trillion exists in international markets alone.
While in India, MSMEs account for about 42 per cent of exports and 92 per cent of industrial employment, it is highly essential that a forum like SlIIC has to be revived and revived effectively, immediately and with statutory powers.
Realizing the significance of MSMEs not only in India, but the world over, it is imperative that statutory powers are vested with the SlIIC in order to enforce their decision for the larger benefit of the nation.
Association viewpoints:
* SlIIC should be vested with statutory powers and the decision of SlIIC must be binding for all agencies.
* SlIIC meetings to be held at least once every month.
* SlIIC must be empowered to adjudicate issues relating to banks and also any other regulating authorities connected with MSMEs.
* Before filing of any case against the MSME, clearance must be obtained from SlIIC.
* Members of SlIIC must include all regulating agencies related with MSMEs as applicable from case to case, this may include the single window clearance institution.
Without effective functioning of SlIIC, MSMEs can never operate effectively; neither can the sick MSMEs be revived. The potentially viable sick MSMEs, estimated to be about 50 per cent of the total strength now, especially in the manufacturing sector, we cannot afford to neglect the same. The bankruptcy code, when implemented has several harsh and stringent recovery stipulations against promoters, who could actually be innocent, especially in the MSME sector. Hence, the role of SlIIC is highly essential to make the dream of our Prime Minister, “Make in India” a success.