FCIK calls for one-time, structured resolution of MSME NPAs
Srinagar, Jan 25: The Federation of Chambers of Industries Kashmir (FCIK) has reiterated its demand for immediate intervention by the Jammu and Kashmir government to facilitate a one-time, structured and humane resolution of Non-Performing Assets (NPAs) and stressed accounts of sick Micro, Small and Medium Enterprises (MSMEs), many of which, it said, have slipped into distress due to circumstances beyond the control of entrepreneurs.
In a statement issued here, FCIK said the flow of institutional credit to the industrial sector in Jammu and Kashmir has remained severely constrained since 1989, when most of the 47 banks and financial institutions operating in the region either shut down or significantly curtailed their operations. This, the Federation said, left J&K Bank as the primary source of credit, resulting in a near-monopolistic lending environment marked by interest rates 3–5 per cent higher than the national average, rigid collateral norms and an abnormally low credit-deposit ratio for MSMEs.
While acknowledging a visible shift away from the earlier “name and shame” approach under the present leadership of J&K Bank, FCIK expressed concern that SARFAESI and e-auction notices continue to be published regularly in local newspapers. Such actions, it said, cause severe social stigma, psychological stress and reputational damage to entrepreneurs who defaulted due to prolonged instability, lockdowns, delayed government payments, natural calamities and economic disruptions spanning more than three decades.
The Federation recalled that soon after assuming charge, the Managing Director of J&K Bank had assured FCIK of a concrete and durable solution, including the launch of a Special One-Time Settlement (SOTS) scheme and strict adherence to the RBI framework for revival and restructuring of MSME accounts, as well as Government of India guidelines. These guidelines, FCIK noted, have been held to be mandatory by the Supreme Court before classifying MSME accounts as NPAs.
FCIK further said the UT government had constituted a high-level committee under the chairmanship of the Principal Secretary, Finance Department, with the Commissioner/Secretary Industries and Commerce and the Executive Director of J&K Bank as members, to devise a comprehensive solution to the chronic NPA problem. However, it expressed concern that the committee has yet to deliver tangible outcomes, even as coercive recovery measures continue on the ground.
The Federation stressed that a mere delay of three instalments should not automatically lead to MSME accounts being declared NPAs, followed by action under Sections 13(2) and 13(4) of the SARFAESI Act. It said enterprises invest both borrowed funds and personal capital in fixed assets, machinery and raw materials, making immediate recovery of funds locked in such assets economically unrealistic and administratively unjust.
With both the UT government and J&K Bank appearing aligned on resolving the NPA backlog through a Special OTS and other measures, FCIK demanded an immediate moratorium on coercive actions, including SARFAESI notices, e-auctions, sealing of units, filing of recovery suits and engagement of recovery agents. It stressed that settlement must precede enforcement to prevent avoidable litigation, mental distress and business closures.
FCIK said it would ensure full compliance and settlement by MSMEs under its fold, provided the settlement framework is fair, uniform and non-discriminatory. It also asserted that SOTS should not be linked to mortgage value, noting that many MSMEs were historically compelled to mortgage ancestral homes and personal properties due to the lack of alternative credit options. The Federation added that higher interest rates charged during turbulent years must be factored in while determining principal haircuts, in line with concessions extended to enterprises elsewhere in the country.
