SRINAGAR: The Federation of Chambers of Industries Kashmir (FCIK) has questioned the Reserve Bank of India’s Regional Office, Jammu, over what it described as the failure of successive review meetings to translate into relief for distressed micro, small and medium enterprises (MSMEs) in Jammu and Kashmir and Ladakh.
Reacting to the 72nd meeting of the Empowered Committee on MSMEs for J&K and Ladakh, FCIK demanded a public account of the rehabilitation measures implemented, financing deficiencies addressed and enterprises revived through the mechanism. It said repeated discussions on liberal financing, credit guarantees and revival had not resolved the problems confronting industrial units.
“After 72 meetings, disclose how many enterprises were rehabilitated, financing deficiencies corrected and decisions implemented. Meetings held cannot be equated with results achieved,” the Federation said.
FCIK called on the RBI’s Regional Office to ensure that the specific economic conditions of the region inform banking policy and that persistent credit bottlenecks are addressed through corrective measures. It also sought details of the recommendations made by the office over the years and the action taken on them.
The Federation said enterprises, particularly in Kashmir, had lost thousands of working days because of turmoil, shutdowns, restrictions and natural calamities. During these disruptions, interest liabilities, idle wages and statutory payments continued to accumulate, exhausting working capital and pushing businesses towards costly emergency borrowing.
It said some enterprises had been forced to depend on overdrafts carrying interest rates of up to 18 per cent, while inadequate financing and delayed assistance had compounded their distress.
FCIK asked whether the Regional Office had placed a comprehensive assessment of disruption-related debt before the RBI Governor and what special measures it had recommended to address the accumulated liabilities. It called for rehabilitation, realistic restructuring and affordable settlements based on borrowers’ repayment capacity and the causes of their financial distress, arguing that viable businesses should not be driven towards the loss of productive assets and family properties.
Rehabilitation framework
The Federation also raised concerns over the handling of stressed MSME accounts, alleging that banks often allowed accounts to turn into non-performing assets (NPAs) without timely intervention under the RBI’s Framework for Revival and Rehabilitation.
It questioned why, despite provisions for early identification of stress and corrective action, entrepreneurs reported that meaningful engagement with banks began only after recovery notices were issued.
FCIK sought a bank-wise account of eligible enterprises identified before NPA classification, those considered for corrective action, accounts restructured or revived, and cases referred for recovery. It also demanded reasons wherever rehabilitation requests were rejected and details of action taken against banks that allegedly bypassed the prescribed safeguards.
The Federation said NPA classification was frequently followed by notices under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and announcements of e-auctions, even when requests for rehabilitation or settlement remained unresolved.
It argued that public recovery campaigns could further damage an entrepreneur’s reputation, business relationships and prospects of revival, particularly in a closely knit society.
Unpaid invoices
FCIK questioned the effectiveness of repeated calls for greater adoption of the Trade Receivables Discounting System (TReDS), saying the mechanism could not deliver the intended benefits without the participation of government departments and public sector undertakings purchasing from MSMEs.
It said seller registration alone was insufficient, as public buyers also needed to register, accept eligible invoices and enable their discounting to provide timely liquidity to suppliers.
The Federation sought details of the government departments and PSUs onboarded on TReDS, invoices accepted, amounts financed and timelines for invoice acceptance. It also asked the RBI Regional Office to pursue directions from the J&K Government and set deadlines for addressing administrative obstacles.
“Repeated references to TReDS at meetings do not release money trapped in unpaid bills,” it said, urging the Regional Office to help ensure that the system works in practice.
Debt tribunal
The Federation also sought intervention to improve access to debt adjudication for borrowers in Jammu and Kashmir, who it said were compelled to pursue proceedings in Chandigarh at considerable expense and inconvenience.
While acknowledging that establishing a Debts Recovery Tribunal falls within the Central Government’s authority, FCIK demanded details of the Regional Office’s recommendations and follow-up for a tribunal in Jammu and Kashmir or regular circuit sittings in Srinagar and Jammu.
It said access to a practical and affordable legal remedy was particularly important when the productive assets and homes of entrepreneurs were at stake.
Recalling its engagement in 2005 with then RBI Governor Dr Y.V. Reddy and 15 Deputy and Executive Governors in Srinagar, FCIK said the discussions had helped secure concessions and strengthen monitoring through Empowered Committees.
However, it said the Empowered Committees, the State Level Inter-Institutional Committee and its subcommittee, which were intended to facilitate the rehabilitation of sick industrial units, had failed to deliver and were subsequently abandoned.
The Federation sought an explanation on what happened to the earlier concessions and rehabilitation mechanisms, why they became ineffective and what alternatives had replaced them.
FCIK has urged the RBI Governor to review the performance of the Regional Office and put in place a time-bound programme for resolving legacy debt, enforcing rehabilitation safeguards, securing effective TReDS participation and improving access to debt adjudication.
It said the effectiveness of the RBI’s stated objectives had to be measured against the experience of enterprises on the ground, adding that businesses which had survived decades of disruption needed concrete intervention rather than further assurances at review meetings.
