Coronavirus-induced lockdown: SMEs staring at a bleak future

SMEs need an interest waiver of at least six months to get businesses running again, according to Mukesh Mohan Gupta, Chairman, CIMSME.

Pramiti Lonkar

April 07, 2020 / 12:55 IST

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As the lockdown continues, small and medium enterprises have been adversely affected as manufacturing has come to a grinding halt.

"Without business activity for three months, it is highly unlikely that MSMEs will be able to repay the debt," said Mukesh Mohan Gupta, Chairman, Chamber of Indian Micro Small and Medium Enterprises (CIMSME).

Further, there is no clarity on the interest payments of term loans. Banks have been given discretion over the implementation of moratorium. According to Gupta, several SMEs have complained that installments have been debited from their accounts.

"Estimating the business level and its impact on working capital and hence availability of cash flows for debt servicing and repayment post the moratorium period will be a challenge. Borrowers will need to run various scenario analysis assuming level of COVID-19 impact on their business and cash flow over the next 3 to 12 months period to ascertain their ability to service debt," said Sanjay Doshi, Partner, Deal Advisory - Financial Services, KPMG India.

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