Retailers Association of India (RAI) on Wednesday asked Finance Minister Nirmala Sitharaman to extend benefits of emergency credit line guarantee scheme to retailers while seeking a moratorium on principal and interest of all loans for up to 6 months stating that curbs due to the second wave of COVID-19 have crippled the sector.
Putting forward a series of demands, RAI said around 80 percent of the retail stores are closed due to various restrictions across states and almost Rs 75,000 crore could turn NPA if urgent measures to ease the working capital challenges are not taken by the Reserve Bank and the Centre.
"Retail businesses across the country are among the worst hit as several states have mandated lockdown of malls and shopping complexes where most modern retailers operate. The industry is finding it hard to survive through the immense financial stress that is threatening to derail businesses," RAI said in a statement.
In a submission to the Ministry of Finance, RAI said it has recommended that the ministry and the Reserve Bank of India step in to bring some relief to the mounting stress on the retail businesses in the wake of the second wave of the pandemic.
It asked the ministry to extend benefits of emergency credit line guarantee scheme (ECLGS) 3.0 to retail companies as well, saying the availability of additional funding facility to the eligible retail business will go a long way in contributing to their revival, protecting jobs, and creating a conducive environment for employment generation.
Seeking a moratorium on principal and interest on loans for 6 months, RAI said the retail sector "represents an investment of Rs 2,50,000 crore and almost Rs 75,000 crore could turn NPA if urgent measures to ease the working capital challenges are not taken by the Reserve Bank of India and the Government of India."
It further said, "This will put at risk almost 3 million jobs directly in the retail sector. Associated sectors that depend upon retail would also be similarly impacted. In the textile sector alone, across the entire value chain almost 10 million jobs are at risk. Further, it will extinguish the engine that can kick-start a consumption led recovery for our economy."
In order to help the retail industry deal with the higher interest burden, RAI said interest rates on all loans to retail industry must be reduced to an effective rate of 6 percent through suitable mechanisms such as interest subvention schemes.
RAI also asked RBI to instruct banks to increase the working capital limit for retailers by 30 percent to help them pay salaries and suppliers.
Commenting on the issues faced by the retail industry at present, RAI CEO Kumar Rajagopalan said, as of now, almost 80 percent of the retail stores are closed due to various restrictions across states, and the few stores that remain open do not have footfall.
The cash inflow of the industry has come to a standstill, while the fixed operating costs remain intact, he added.
"With zero revenues retailers are still expected to pay overheads such as salaries, electricity and rentals. If a timely relief package is not provided by the government to ease the financial stress, then the industry will find it hard to survive this second wave," Rajagopalan said.