Retailers are miffed with lenders as many found banks not approving additional working capital loan despite a Reserve Bank of India mandate.

A survey conducted by the Retailer’s Association of India covering more than 300 retailers across the country has revealed that while 54 per cent of those surveyed requested additional working capital loan from their banks, approvals were given to only 15 per cent.

Straightway refusal, low cash flow and inadequate cover were among the reasons the survey listed as the causes for rejection. The survey further said that PSU banks have been comparatively more helpful in extending credit than private banks. PSU banks rejected around 28 per cent of all loan requests, while private banks sanctioned less than 10 per cent.

Around 52 per cent of the respondents are satisfied with the financial support and services extended by PSU banks during Covid-19 and almost an equal percentage are dissatisfied with private banks.

The association in a statement said that private banks have been much more reluctant than PSU banks to extend additional working capital loans to retailers despite directions issued by the RBI and the government.

The RBI, in April, had encouraged banks to lend more by cutting the reverse repo rate by 25 basis points, easing bad-loan rules and granting a three-month moratorium for payment of EMIs due between the March 1 and the May 31, 2020. The moratorium has been further extended by three months till August 31, 2020.

Fifty-two per cent of the retailers surveyed have not opted for the moratorium from their banks.

“Retailers selling both essential and non-essential items have reported a 40 per cent and 100 per cent drop in sales, respectively, because of the Covid-19 situation. The closure of businesses over the past couple of months has resulted in a loss of revenue, which has rendered some of them unable to pay salaries to their staff. The reluctance of banks, especially private banks, to come to their aid is unfortunate,” said Kumar Rajagopalan, CEO of the Retailers Association of India.

Private banks, however, said that they have to be more cautious when it comes to extending credit in the current economic situation and adding to their risk weighted assets as unlike their public sector peers, they don’t have the recapitalisation support from the government.