'When people needed oxygen, RBI gave Horlicks'

'Are they assuming that by the end of May or the 15th of June, we will see the end of the pandemic?'

IMAGE: Workers pack incense sticks made from discarded flowers that were collected from outside temples and the banks of the Ganga at a factory in Kanpur. Photograph: Sunil Kataria/Reuters

RBI Governor Shaktikanta Das had an unscheduled address on May 5 to unveil the Resolution Framework 2.0 for covid related stressed assets of small businesses, MSMEs and also individuals.

Do the measures announced by him satisfy or help the MSMEs that are already in deep trouble?

In an interview with Shobha Warrier/Rediff.com, K E Raghunathan, entrepreneur and the Convenor of Consortium of Indian Associations, says the measures are not likely in anyway help the MSMEs and self-employed individuals who are severely impacted by covid.

The first of a two-part interview:

Like the RBI says, will the Resolution Framework 2.0 help the small businesses and MSMEs tide over the crisis caused by the pandemic?

No. Let's first find out the need for this announcement so that result can be analysed.

The RBI was forced to come out with the announcement because the second wave has been very severe on MSMEs, micro and small entrepreneurs, and all those who were involved in business, including the gig workers.

When people needed oxygen, the RBI governor has given them Horlicks.

I don't understand how you can call this as a remedial measure for Covid impact.

We are totally disappointed with the announcement.

Why are you disappointed?

I am speaking from the point of view of those who have been impacted or unable to carry out business due to restrictions imposed by government.

The announcement came on the 5th of the month.

We have been saying for the last one week, that full lockdown will come into force in many states soon and businesses will be severely impacted.

Even the entrepreneurs and their families have been contracted with the virus, and this time, we are taking the big risk of keeping the factories open.

So, we pleaded with the government to let us hold as much money in our hands as possible, so that we could meet emergency situations.

What we asked for, was relief from the payment of EMI in the form of moratorium. For the loan we have taken, normally ECS (Electronic Clearing Service) will be automatically debited from our account on any day between the 5-15th of a month.

Next challenge is salary commitment, rental, electricity, etc, are normally between 5th to 10th of the month. But this time, we have extremely limited resources at our disposal.

All our life savings and further loans availed, have been wiped out in the last one year, as we worked only 2-3 months last year. So, we do not have any cash left in our hands today.

Unfortunately, the RBI announcement did not give the direct moratorium extension.

IMAGE: RBI Governor Shaktikanta Das. Photograph: ANI Photo

The RBI announced an eligibility criteria for restructuring of loans...

Who have been given the eligibility criteria to restructure, are those accounts that are 'standard' as on 31.3.21. In the current situation more than 60 per cent of the micro and small enterprises will not fall under the category of 'standard' as on 31.3.21.

What about the sectors which have not taken off at all like tourism, saloons, spas, gyms, transport, hotels, restaurants, service sector, summer business activities, etc?

All of them have lost their businesses for the second consecutive year. Is it because of their fault?

No. It was because of the pandemic that they lost their businesses. Also because of the government's decision to make them be at home.

So, when they are not made eligible for restructuring, how do you expect them to survive?

Is the eligibility criterion the biggest drawback in the announcement?

Not only that. Let's assume your account is a standard account and you want a restructuring plan.

For that, you must go to the bank. How many banks are functioning full time with full staff?

Okay, you go to the bank, but do you have a realistic plan to seek?

How can you have a plan when you yourself have no idea how long this uncertainly is going to continue?

Can anyone predict the situation one month from now, for you?

So, you must make a guesstimate which is subjected to questioning by the bank.

It is like doing Annadaanam in a temple with an eligibility criterion.

All these will take time and will kill the very essence of the objective of the announcement.

Do you think it was due to the lack of understanding of the ground realities that the RBI made the announcement?

When there is so much uncertainty around, how could they make a policy for the next 6-8 months or even allocation for three years?

Are they assuming that by the end of May or the 15th of June, we will see the end of the pandemic?

IMAGE: K E Raghunathan. Photograph: Kind courtesy, K E Raghunathan

There is this announcement about the RBI conducting a special three-year long-term repo operation of Rs 10,000 crores at the repo rate for small finance banks....

That's what I am saying. How can they make such an announcement in today's circumstances? You can't even predict what will happen in the next three weeks, leave alone three months or years.

What they should have done is, handle today's emergency. On the 5th of May, my concern is, how do I pay the EMI to the bank?

How do I pay the interest to the loan I have taken from the bank?

How do I make more cash in my hands to face an emergency?

For this, I need only two things. One, postponement of the expenses. Two, making more money available through loan, if I want.