Budget 2023: Entrepreneurs call for end to hostilities, from ‘jail for doing business’ to ‘outright harassment’ by banks

Several actions by financial institutions are crippling micro and small businesses and the budget should give some protection in this regard, industry stakeholders say.

Vikas Singh Chauhan, director of the MSME-controlled Home Textile Exporters Welfare Association (HEWA), said the bank would declare the factory as a non-performing asset (NPA) if the entity involved fails to repay the loan within 90 days. I’m here. He calls this “total harassment” by banks. “Our biggest demand is for the government to cancel the Securitization and Restructuring of Financial Assets for Small and Medium Enterprises and Enforcement of Security Interests (SARFAESI) Act for several years,” Chauhan said. The law allows banks and other financial institutions to put a borrower’s commercial or residential property at auction to recover loans in the event of default.

Industry stakeholders point out that small businesses will bear the brunt of the crisis. Mentioning economic turmoil due to Covid, geopolitical issues, supply chain disruptions and inflation, the world is facing one crisis after another these days, and small businesses will need some relief for some time to come.

SMEs may also be forced to pay an upfront penalty if they want to move from one bank to another. I call it a strange practice. Anil Bhardwaj, secretary general of the trade association, said these lenders would impose an upfront penalty of around 4% on his MSEs who try to change banks due to poor service. This goes against the Micro, Small and Medium Enterprise Code promoted by the Reserve Bank of India, he argues, FISME.
SMEs with a large informal base account for almost a third of the country’s economy and more than 40% of exports. The sector has a wish list that includes fixing regulatory and compliance bottlenecks. The government has introduced some reforms and cut down on bureaucracy, allowing the country to rise in the World Bank’s Ease of Doing Business Index. However, small business players say there are some specific issues that need to be addressed to facilitate their business.

Chauhan emphasizes the need to focus on policy certainty. “Forget about fighting China. We should aim to be like Vietnam first. To do that, we first need a high degree of policy predictability,” he says. To encourage more entrepreneurs, the government should also give concessions on goods and services tax and land purchases. “But this has not happened. Instead, they have been tagged as dangerous exporters, with GST refunds and duty refunds pending. On the financial side, FISME is asking the government to roll out an option to replace bank guarantees (BG) with guaranteed bonds (SB).

25% of central government procurement must come from MSMEs, but the requirement of BG keeps many SMEs out of this business. These guarantees require a security deposit that blocks a significant amount of working capital. SG does not require collateral. In previous budgets, the finance minister had announced such a route, but the decision has yet to be implemented, FISME said.

Saket Dalmia, president of industry group PHDCCI, warns that the waterfall mechanism in bankruptcy and bankruptcy law needs to be readjusted. This treats SMEs as unsecured creditors during the distribution of assets after liquidation. As such, small businesses will receive a pittance after collateral creditors and employees are paid. “It could lead them to bankruptcy. For a good business climate it is imperative to give smaller operational creditors higher priority during bankruptcy proceedings,” Dalmia adds.

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Industry observers also suggest the budget will address the requirement for multiple identities to conduct business operations. A “Unique Enterprise Number” (UEN) on Aadhaar’s line could be a way to streamline the process, they add.

Rishi Agrawal, CEO and co-founder of TeamLease RegTech, says the employer compliance ecosystem has a deep-seated hostility and distrust of entrepreneurs. “The provision of imprisonment under 843 laws, rules and regulations governing business activities has 26,134 cases of compliance. Jailed for doing business affects business activities in India, according to the report. Two of the five clauses that grant This scares off aspiring entrepreneurs and promoters from trying to grow their business.

Agrawal added that in 2022, government ministries, departments and regulators will publish 4,880 regulatory updates on more than 2,000 websites in the form of notices, circulars, press releases and ordinances. I’m here. “This makes it difficult for compliance officers to keep track of up-to-date compliance obligations. He adds that it helps a lot in reducing complexity.

Another glaring issue that industry observers would like future budgets to address is the issue of multiple identities required to conduct business operations. Currently, businesses are required to obtain multiple IDs (PF, ESIC, PAN, CIN, TAN, etc.) issued by different departments of central and state governments. This creates a situation where there is no single, authoritative source of information for building a company’s compliance and risk profile.

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