After 4 successive Repo rates this year, the latest hike by RBI by 35 basis points has taken the overall increase in basic bank interest to 225 points which is making the very survival of micro and small scale entrepreneurs difficult by eating away their already thinning margins, K.N. Narasimha Murthy president of KASSIA in a release and urged the Government to extend a helping hand to the MSEs at a time when they are just coming out of the pandemic hit environment.
“The MSMEs are the second largest provider of jobs after agriculture and their manufacturing sector contribution to the GDP is over 30%, and therefore when they feel burdened it is incumbent on the government to provide them some relief,” the KASSIA president said.
With Inflation around 9.1% highest since 2008, higher borrowing interest rate could have an “amplified effect”, especially on the Covid-affected loans. Further the mounting repayment pressures will result in higher NPAs and bad debt in MSE borrowers, thus also adversely the bottom line of the lending banks, he pointed out.
“When such burdens are not followed up by quick and urgent relief measures it is natural for a micro and small scale entrepreneur to think of taking no risks in his business, defer expansion, survive with slow growth, and his confidence will reduce with higher credit stress and lack of willingness towards investment in new ventures. This will lead to increased unemployment, trigger a recession and rise in jobless population,” he said and appealed to the government to come to the rescue of the micro and small scale entrepreneurs who are fighting for their very survival.
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