Loan Melas Are Here, But Why Now?

FM Nirmala Sitharaman on Thursday asked banks not to announce any stressed loan account for MSMEs as NPA till March 2020 and work on its debt modification
Loan Melas Are Here, But Why Now?
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Entrepreneur Staff
Correspondent, Entrepreneur India
3 min read

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On Thursday, Finance Minister Nirmala Sitharaman made an official statement regarding Public Sector Banks organizing credit ‘Shamiana Meetings’ in 400 districts of India. 

In a bid to combat the economic slowdown, Sitharaman stated that the event is aimed to ensure the maximum credit disbursal during festive season to the companies. To address the market complaining about low liquidity, the government is looking to boost credit that will bring liquidity for businesses and create jobs.

Targeting the various sectors, Finance Minister mentioned about the industries to be taken in the priority list. Here are the sectors and their declining records which triggered the government to bring upon the measures overpowering liquidity. 

Eyeing the recent records of the auto sector, it can be said that if any industry is most badly affected by the downturn is automobile Sector. In the month of Aug-September for the fiscal year 2019, the passenger vehicle sales declined around 32 percent whereas commercial vehicle sales plunged to 38.71 percent. 

The crisis in the automobile sector is intensifying with every passing month as the comprehensive domestic sales fell to a record low. Recognizant of the overall production, there was an 18.45 percent plunge in the production for this month. Known as the country’s dominant company in car production, Maruti Suzuki faced big loss to its production figures during slowdown. 

According to a report in Economic Times, the company’s share fell to 3.6 percent in the month of September, resulting in the production shutdown of Maruti Suzuki’s Manesar and Gurugram plant for two days. The plants at Gurugram and Manesar have a combined annual production capacity of 1.58 million units. In Gujarat, Suzuki Motor Corp subsidiary produces 0.5 million units that are sold by Maruti Suzuki.  Working upon the auto slowdown, the government reduced GST on vehicles and initiated ‘Scrappage Policy’ for the betterment. And now, the Finance Minister has come up with the PSBs Loan Mela which would be an additional ease for Automobile industry. 

FMCG: 

In this financial year, Indian consumer goods industry could record its lowest pace of revenue growth in a decade and a half. Downturn constraints and lower farm income is likely to impact India’s leading consumer companies. 

According to the Credit Suisse report by ET, despite the slowdown over FY16-19, FMCG companies grew their earnings faster by expanding margins from levers like the fall in crude prices and GST savings. Revenue records say that 2Q and 3Q FY20 to see a further slowdown in revenue growth of our coverage universe to about 5 percent. This will make FY20 the slowest year of growth for FMCG in 15 years. The last period of such low growth was 2000-03. The BSE FMCG index has declined 7.4 percent. In 2019 so far, while the broader Sensex has gained 1.4 percent.

“We are heading ahead with the efforts to strike down the revenue troubles coming in the way of progress for Indian companies. Government will leave no stone unturned to stabilize the financial chronicles of the companies and its aspects of production, manufacturing, import and export. PSBs decision to call for ‘Shamiana Meetings’ is also amongst one of the steps towards better fiscal structure” said an MSME source.

 

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