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Banks see decline in lending to business units

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As 70% of ancillary units struggle to sustain operations
Leave alone achieving lending targets, branches of nationalised banks serving the industrial estate area of Thuvakudi are apparently pre-occupied with recovery of non-performing assets (NPAs) as a majority of ancillary industries have turned sick.

There has been a strain in year-on-year performance in lending for most of the branches of the nationalised banks.

Over the last two to three years, there has been a significant fall in lending for starting new industries and capacity augmentation of existing ones. This predicament is common for the SSI branch of SBI; SME branch of Indian Bank; and branches of Canara Bank, Punjab National Bank, United Bank of India at Thuvakudi; and the branch of Indian Overseas Bank at Vazhavanthankottai, owing to dwindling of orders to the ancillary fabrication units, industry sources said. A majority of the fabrication units here depend mainly on BHEL for orders.

With over 70% of the hundreds of ancillary units struggling to sustain operations, there is little that nationalised banks could do to ameliorate the difficulties of their long-time customers.

Only for some of the industries, current cash flow demands are being considered on a case to case basis, according to a bank official. SARFAESI ( Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest) Act, 2002, hangs as a Damocles sword for the rest of the units, some of which have augmented capacities in anticipation of robust orders from BHEL.

According to an industrialist, though a handful of attractive orders won by BHEL during this fiscal could reflect in outsourcing of component fabrication to the extent of 2.75 lakh tonnes valued at over Rs. 1,500 crore, the surviving units are at a severe disadvantage since ancillary players with larger capacities in other parts of the country are prepared to take up the orders for lesser rates, deriving the advantage of economy of scale.

Nevertheless, there will still be considerable demand for lending at branches of nationalised banks in and around Thuvakudi industrial estate. No wonder, screws will be tightened for financing the falling number of surviving units to rule out diversion of funds, a bank official said.

According to the official, there is a compelling need to provide a lifeline to the struggling industries. But the rectification of the situation requires a concerted action by the Central government and the judiciary. While the former could pitch in by announcing a revival package considering Tiruchi, the country’s hub of fabrication, as a special case, the expectation from the latter is a considerate view on re-allotment of cancelled coal blocks so as to pave way for order books of power equipment manufacturers turning healthy again.


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