FCIK urges J&K Bank to follow Supreme Court rulings on MSME accounts

Srinagar, Aug 17: The Federation of Chambers of Industries Kashmir (FCIK) has called upon J&K Bank to religiously follow the Central Government orders, Reserve Bank of India (RBI) guidelines and Supreme Court rulings while classifying accounts of Micro, Small and Medium Enterprises (MSMEs) as Non-Performing Assets (NPAs) besides revisiting all MSME accounts previously so classified.

FCIK in a statement stated that it regretted that over past few years, the bank has left no stone unturned in intimidating, humiliating and harassing the local enterprises which continued unabated even though MSMED Act-2006 provided for identification of incipient sickness and revival of MSMEs before classifying these as NPAs.

Several entrepreneurs from various industrial estates had called on the Advisory Committee Members of FCIK to inform that the Bank had recently obtained fresh orders from Chief Judicial Magistrate on concerned Tehsildars for attaching and forfeiting their properties mortgaged to the bank.

FCIK regretted that the action was being contemplated merely days after the ruling of the Apex Court that banks and financial institutions were not empowered to classify loan accounts of MSMEs as Non-Performing Assets without following the mandatory procedure prescribed by the Central Government in its 2015 notification.

A double bench of Justice Bela M Trivedi and Justice R Mahadevan on August 1, 2024 has ruled that the 'Framework for Revival and Rehabilitation of MSME', as notified by the Centre by its May 29, 2015 notification and subsequent directions issued by the Reserve Bank of India in 2016, had statutory force and were binding on all scheduled commercial banks licensed to operate in India by the RBI, informed FCIK.

"What is contemplated in the "Framework for Revival and Rehabilitation of MSMEs" contained in the instructions/ directions stated hereinabove, is required to be followed prior to the classification of the borrower's account as Non-Performing Assets," the bench has ruled.

FCIK hailed the observation of the Apex Court that the instructions issued by the central government under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 and by the RBI under the provisions of the Banking Regulation Act had statutory force and were binding on all banking companies.

“Had the orders of GOI and guidelines of RBI been followed by J&K Bank in its letter and spirit, 90% of the enterprises would have got revived to their normal activities” observed FCIK.

FCIK regretted that the Bank had no regard to the sufferings of local enterprises demolished by disturbances and natural calamities which was evident from the very fact that no waiver or concession on interest was granted to the customers during deluge of 2014 despite that the fact the services of the bank remained disrupted during the period.

FCIK President Shahid Kamili has appealed the UT Government to make the bank revisit their NPA classification of MSMEs and initiate necessary steps for negotiation and revival of viable units at the earliest besides putting all harsh actions and cases against MSMEs on hold.

He hoped that the scope of the High Level Committee under the Chairmanship of Principal Secretary, Finance Department constituted by the UT Government vide order No: 940-JK (GAD) of 2024 dated 8-04-2024 was expanded to look into this vital aspect of such aberrations and their curative measures. He has also requested the concerned courts and revenue authorities to take cognizance of the Hon’ble Supreme Court rulings of August 1, 2024.