Q&A library

Wanted to understand how to manage cash in business in this situation. Please help.
Questioned by KG, Maharashtra
The pandemic situation has impacted over 50 per cent of Indian companies on their operations and nearly 80 per cent have witnessed decline in cash flows. Now the crisis remains as to prepare for this major credit crunch, some of the best practices and strategies for consideration are:1. Ensuring a robust framework for managing supply chain.2. Ensure your own financing remains viable3. Focus on the cash-to-cash conversion cycle4. Revisit your variable costs and capital investment plans5. Focus on inventory management, extend payables intelligently6. Manage and expedite receivables7. Consider alternate supply chain financing options8. Audit payables and receivables transactions9. Consider an alternative or non-traditional revenue streams11. Convert fixed to variable costs, where possible12. Utilize an online payment platform, for a smooth transaction process.Cash flow management is an integral element of a company and it’s mandatory to evaluate cash flow requirements, develop appropriate actions under various scenarios, and assess potential risks in and to their customer base and supplier network from time to time.Source: https://www2.deloitte.com/za/en/pages/about-deloitte/articles/managing-cash-flow-during-period-of-crisis.htmlhttps://economictimes.indiatimes.com/news/economy/indicators/coronavirus-impact-over-50-of-india-inc-sees-impact-on-ops-80-witness-fall-in-cash-flow/articleshow/74726229.cms?f

Due to Covid, NPA of finance will shoot up. Restructuring may not resolve the problem. It may just defer NPL (non performing loans) recognition. So many people are totally unaware of loan moratorium especially poor and uneducated people. We are doing our best to recover. Kindly guide on how to manage these kind of situation in view of Collection Executive.
Questioned by SAGAR MADHUKAR MALI, Maharashtra
The segments which will get mostly impacted during the lockdown are repayment collections involving visits to households/borrowers. The loan segment/borrowers who are salaried and collections enabled through auto-debit instructions will be less affected. These loans may witness challenges due to a higher proportion of self-employed borrowers, whose income streams may have gotten affected by the lockdown. The vehicle finance also faces challenges in commercial vehicle loans because of curtailed traffic that may lead to weak earnings for fleet operators. Any delay in return to normalcy will put pressure on collections and asset-quality metrics. Additionally, any change in the behaviour of borrowers on payment discipline can affect delinquency levels. The moratorium will help lenders in managing their asset classification requirement. So that they can give relief to borrowers genuinely impacted by the lockdown, while those with the ability to repay are expected to meet their obligations and avoid an additional interest burden.Technology has transformed every sector including debt collection industry. Modern conversation tools available today such as Artificial Intelligence, chatbots and self-service technology will provide the much-needed makeover to the collection process. This technology helps lenders to reach out to people via channels that are more conducive to a conversation. Collection agents have the choice to negotiate the debt recovery via such friendly channels as opposed to threatening phone calls thereby resulting in higher repayments. This helps in dealing with debt recovery in a better manner, streamlining operations as well as adopting a customer-centric approach to the whole process. However, there is no fool proof method to avoid NPAs/NPL. Having a proactive approach can constantly help to anticipate challenges in the process of debt collection and finding practical solutions for them accordingly.

Is there any chance to extend moratorium? What is the Moratorium affect in all banks and NBFCs?
Questioned by Anjappa Gundumalla, Telangana
India today article dated July 22, 2020 states that the banking sector does not seem comfortable with the idea of another extension of the moratorium on fixed-term loans and equated monthly instalments. They fear that another extension could take a drastic toll on the asset quality of banks.According to a report published in Business Standard, the banking sector is currently divided on extending the moratorium period on loan payments. The current moratorium deadline ends on August 31, 2020. The report also said that State Bank of India Chairman Rajnish Kumar has dismissed the need for further relaxation on repayment, citing initial estimates about deteriorating banks’ asset quality in FY21.Many analysts told the publication that slippages in banks’ asset quality could increase sharply and that financial institutions could be heading for a worrisome year without any intervention. Banks and NBFC’s in India are currently facing severe stress due to the loan moratoriums and many have raised contingency provisioning towards any losses due to the pandemic. Most banks are not optimistic with the idea of another extension of the moratorium on loans and EMIs as it could further lead to deterioration in banks’ asset quality.Experts believe that the six-month moratorium has already resulted in mounting pressure on banks and a third extension is not required. The impact on banks due to the loan and EMI moratorium could last much longer if the prolonged relaxation affects repayment cycles. Many experts said that the bad loan cycle can only end when cash reserves with households increase, and that can only happen when economic activity improves with more employment opportunities.

I have launched new company after Covid and is going slow. If I need money for the business where should I try?
Questioned by Monika Prasad, Haryana
All the major financiers are giving adequate loans for starting new ventures, development, procurement of machinery etc. If you are businessman and willing to start a business of your own, then you can apply for SME loans. One must have proper project plan or business plan in paper so that no bottlenecks arise at the time of getting loan for business. Loans are available in Mudra, namely Kishor wherein loans are from Rs. 50,001 to Rs. 5,00,000 (For buying equipment/machinery, raw materials, business expansion for existing enterprises). Loans under the CGTMSE scheme are backed without any external collateral or third party guarantee. The MSME loan sanctioned by the Member Lending Institution (MLI) is backed by the scheme which provides the guarantee cover for a large portion of the loan amount. Kindly check with your nearest financial institution for getting further details. Visit your nearest public-sector bank / NBFC for opting suitable loan and scheme as per your requirements. You can also consider "Ashwas Dinam Gold Loan" and “Restart India Pradhan Gold Loan” provided by Muthoot Fincorp Ltd (MFL) for immediate funding.

Can Traders register under Udyam? If yes, under which category?
Questioned by Shivam Mehta, Maharashtra
Yes, every type of business entity including one-man company, proprietorship, partnership firm, manufacturer, producer, limited company, private limited company, limited liability partnership firm, co-operative societies, any association of individuals, retailors, Hindu Undivided Family or any other undertaking can register under Udyam/Udyog Aadhaar.Your business needs to meet certain eligibility criteria defined in MSMED Act, 2006 to be classified as a Micro, Small and Medium industry. Owners of enterprise and company should check if they can be classified under MSMED Act. The trader can register under the category as per the turnover of the company.

How do we avail financial support scheme 1.5 Lakh crore declared by GOI. Who are the disbursement bodies/organizations. What are the other support schemes available
Questioned by Subranil Gangabasi, Karnataka
Under the 100% Emergency Credit Line Guarantee Scheme (ECLGS) backed by a Government of India guarantee, Banks from Public & Private Sectors have sanctioned loans worth over Rs. 1.5 lakh crore as of 18th August, 2020, of which more than Rs 1 lakh crore has already been disbursed. Under the ECLGS, Public Sector Banks (PSBs) have sanctioned loans of Rs 76,044.44 crore, out of which Rs 56,483.41 crore have already been disbursed. Whereas Private Sector Banks have sanctioned loans of Rs 74,715.02 crore out of which Rs 45,762.36 crore have already been disbursed. You may visit the nearest top lender banks such as State Bank of India (SBI), Canara Bank, Punjab National Bank (PNB), Bank of India, Union Bank of India and HDFC Bank Ltd, for the schemeshttp://bit.ly/SBIGECL

How do I start a vermi compost plant? How do I apply for government loan, and benefits for this business?
Questioned by abhishek singh parmar, I t college
Central Bank of India has a scheme by the name Cent Vermicompost Scheme. Its main objective is to meet the working capital requirement of setting up the vermicompost units. Repayment time is up to 5-8 years. Limit is maximum up to Rs. 2 crore. For further assistance visit a Central Bank of India branch.It is eligible for all Farmers, SHGs, JLGs of farmer's including tenant farmers, share croppers, Proprietorship/Partnership Firms/Pvt./ Public Ltd. company/ies. etc., Non Government Organizations (NGOs), Cooperatives, Municipal Corporations, Federations, Agricultural Produce Marketing Committees, Marketing Boards and Agro Processing Corporations.

Can I get a loan under CGTSME SCHEME?
Questioned by Rajesh Khandelwal, Maharashtra
If you are new or have an existing small scale manufacturing or service activity you are eligible for the loan. But there are certain entities excluded from it like educational institutions, retail trade, agriculture, self-help groups and training institutes. The business unit must be established as a distinct unit. Necessary approvals, certifications, tax registrations need to be obtained in order to avail the credit facility. The business idea needs to be concrete and a well defined such as model, prospects, cost analysis, projections etc.

I had availed a Gold Loan from " Rupeek " in the month of March 2020 as working capital for my business. Now the gold rate has increased to a different level and would like to know how I can avail a Top up loan for my business purpose. Pls suggest. The top up loan is for restarting my business and the same can be closed within a few weeks.
Questioned by Anushree Ajit Dixit, Maharashtra
The benefit of taking a gold loan is that you get instant liquidity and a free valuation of your gold. You will get higher amounts of loan (LTV) depending on the purity and net weight of the gold deposited. So when you apply for taking a loan by using gold as a collateral, many banks and financial institutions will be willing to lend you the money at reasonable interest rates in attractive features and options. Depending on the bank / NBFC you are taking the loan from, you can also be eligible for part release facility. You may avail gold loan from your nearest Muthoot Fincorp Ltd (MFL) branch, that provides 24x7 SMS loan top up facility. There are several gold loan schemes in Muthoot Fincorp Ltd. for entrepreneurs to restart business. The "Ashwas Dinam Gold Loan" and “Restart India Pradhan Gold Loan” provides maximum value for gold, 180 days steady interest, reduced interest on daily diminishing balance, 24x7 online payment options, 24x7 SMS loan top up facility, part redemption, cash reward for digital transactions and no hidden / pre-closure charges.Please visit your nearest Muthoot Fincorp branch or paste the link on your browser to know more http://bit.ly/MuthootFincorpADGL and http://bit.ly/MuthootFincorpRIPL

I want to purchase raw material for my business. Need financial support. Please advise
Questioned by A.Chandrasekhar, Tamil Nadu
There are schemes available under MSME in Pradhan Mantri MUDRA Yojana (PMMY), wherein any manufacturing MSME having Udyog Aadhaar Memorandum (UAM) can apply for the assistance under the Scheme. These loans are known as MUDRA loans and has products/ schemes namely Shishu (loan up to 50,000/-)Kishore (loans above  50,000/- and up to 5 lakh), Tarun (5 lakh to 10 lakh). Loans are extended for a variety of purposes which also caters to the Textile Products sector activity. For details visit: http://bit.ly/RIMUDRA https://www.mudra.org.in/offeringsAlso Small Industries Development Bank of India (SIDBI) offers a wide range of finance schemes to the Micro, Small, and Medium Enterprises (MSME) industry. Loan amounts can range from Rs.10 lakh to Rs.3 crore. Loan repayment tenures can go up to 10 years. These loans, which are offered at attractive interest rates, provide the necessary capital for the growth and expansion of MSMEs. Loans above Rs.1 crore can be availed without any collateral required. Loan subsidies are also available.Further loans are available under GECL, this Emergency Credit Line Guarantee Scheme provides 100% guarantee coverage by NCGTC to Member lending Institutions on GECL of up to Rs. 3 lakh crore to eligible MSMEs. This Scheme will include MSMEs/ Business Enterprises which are constituted as Proprietorships, Partnerships, Registered Companies, Trusts and Limited Liability Partnerships (LLPs), and also interested borrowers under PMMY. https://www.bankofindia.co.in/pdf/FAQs_on_ECLGS.pdf

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