An Aggrieved Entrepreneur
An MSME can survive a bad market. What it cannot survive is a government that does not pay and a banking system that punishes it for waiting.
India today is repeatedly told that its entrepreneurial ecosystem is thriving, that MSMEs are the backbone of the economy and that the government has put in place an elaborate support system to ensure that small businesses do not fall through the cracks.
There is considerable merit in many of these initiatives. But policy announcements and ground realities are not always the same thing.
For an entrepreneur caught between an unpaid government bill, an inflexible banking system and an unresponsive grievance-redressal mechanism, the much-celebrated ecosystem can look very different. Yes, even when the grievance has been marked to the Prime Minister’s Office, which prides itself on being responsive. That is the real tragedy I am encountering—and I sincerely hope the PMO will take cognisance of the matter and ensure that the concerns raised against the concerned bank official are properly examined and, if found justified, appropriate action is taken.
This is not a theoretical complaint. It is the story of an entrepreneur who maintains that he has completed the contracted work, complied with the stipulated requirements, maintained banking discipline and repeatedly sought institutional intervention—only to find himself fighting the very system that is supposed to protect, support and encourage enterprise.
And therein lies the uncomfortable question: What happens when the Government does not pay, the bank does not accommodate, and an otherwise viable MSME is pushed towards the brink—not because it failed, but because the system failed it?
The work was completed. The payment did not come.
The company, a small engineering firm, completed a government infrastructure project. The work was inspected, certified and approved. The resulting infrastructure stands today and continues to be used by the public.
But the payment did not come.
Not because the work was rejected. Not because the quality was disputed. Not because the contractor had abandoned the project.
The payment was simply delayed—first for months and eventually for years.
Governmental changes, administrative delays, budgetary constraints and bureaucratic inertia compounded the problem.
For a large corporation, a delayed receivable can be an inconvenience.
For an MSME operating on borrowed working capital, a government receivable that remains unpaid for years can become an existential threat.
The entrepreneur still has to pay salaries, statutory dues, suppliers, electricity bills, taxes and, crucially, the bank.
The Government may delay paying the entrepreneur.
The bank does not necessarily delay collecting from him.
That is where the real crisis begins.
The bank that should have understood the problem
The company had a working-capital facility with a public-sector bank and, according to the entrepreneur, had maintained the account responsibly for years.
Indeed, during the COVID period—when businesses across the country were under extraordinary financial stress—the account reportedly had surplus funds above the sanctioned limit.
That history should count for something.
But when government receivables remained unpaid and the working-capital account came under pressure, the interest burden increased.
According to the entrepreneur’s records, interest that had been around 9 per cent rose substantially, despite the loan being fully secured.
The collateral, according to the bank’s own valuation reports, was worth considerably more than the outstanding liability.
The consequence was painfully predictable.
Higher interest increased the overdue amount.
The increased overdue worsened the account’s financial position.
The deteriorating position then increased the pressure on the borrower.
And the possibility of adverse credit classification created another layer of financial distress.
A vicious circle had been created.
The entrepreneur was not asking the bank to waive a genuine liability. He was asking the institution to recognise the circumstances that had created the stress in the first place.
That distinction appears to have been lost somewhere in the machinery.
Fourteen months of letters—and still no solution
The entrepreneur did not remain silent.
Letters were written.
Meetings were held.
Officials at different levels of the bank were approached, from the branch and regional levels to senior officials.
The meetings were reportedly cordial. Assurances were reportedly given.
But the problem remained.
Then came another deadline.
Another notice.
Another demand for payment.
Another warning about the consequences of non-compliance.
According to the entrepreneur, personal savings were repeatedly used to meet demands, based on assurances that the underlying issue would eventually be resolved.
It wasn’t.
Fourteen months of correspondence and meetings apparently produced what bureaucracy often produces best: paperwork without resolution.
That is not grievance redressal.
It is grievance management.
The collateral paradox
The numbers make the situation even more difficult to understand.
According to the bank’s own valuation, the combined collateral was assessed at more than ₹6.33 crore.
After applying the bank’s prescribed 15 per cent haircut, the value reportedly stood at approximately ₹5.38 crore, against an outstanding liability of around ₹4.23 crore.
That represents security coverage of approximately 127 per cent.
Yet, according to the entrepreneur, an interest rate applicable to a lower collateral-coverage category was being charged.
There is an additional irony.
The enhanced valuation was subsequently used by the bank while determining the minimum sale price mentioned in the No Objection Certificate for disposal of the collateral.
In other words, the higher valuation was apparently good enough when determining the value of the asset—but not, according to the entrepreneur, when determining the applicable interest category.
If that interpretation of the bank’s policy and records is correct, it raises an obvious question:
Can the same valuation be good enough in one transaction and conveniently inadequate in another?
A banking system must operate on consistency, transparency and rules—not selective application of rules.
When even a court order does not bring the money
The entrepreneur eventually approached the High Court.
He won.
Then, according to the account, he won again.
The Court directed the government authorities concerned to release the outstanding dues.
Yet the money still did not arrive.
Contempt proceedings followed.
And this exposes perhaps the most disturbing part of the entire episode.
A court order is not a cheque.
A judicial direction can establish a legal entitlement, but the entrepreneur still needs the actual money to keep the business alive.
Every day that compliance is delayed, interest continues to accumulate.
Every day that payment does not arrive, working capital remains blocked.
Every day that the bank’s demands continue, the entrepreneur’s financial position deteriorates.
Justice delayed is often described as justice denied.
For an MSME, payment delayed can become business denied.
The cruelest irony
Here is the paradox that deserves serious attention from policymakers.
The borrower is dealing with a government department that allegedly owes him money.
At the same time, he is dealing with a public-sector bank that is demanding money from him.
Both institutions belong, ultimately, to the public system.
One side says, in effect, wait for your money.
The other says, pay us now.
And the entrepreneur is trapped between the two.
This cannot simply be dismissed as an individual banking dispute.
Nor should every case of business distress automatically be blamed on the Government or the banking system.
But where documentary evidence establishes that a viable MSME’s financial stress has been directly caused by delayed payment from a government entity, the regulatory and banking framework should have a mechanism to recognise that reality.
An entrepreneur who cannot pay because his government client has not paid him is not automatically equivalent to a borrower who simply refuses to pay.
That distinction matters.
India’s MSME policy must meet India’s MSME reality
The government is right to emphasise MSMEs.
It is right to promote entrepreneurship.
It is right to speak about ease of doing business, access to credit, formalisation and financial inclusion.
But the real test of policy is not what is announced from a podium.
The real test is what happens to an entrepreneur when the system turns against him.
Can a government contractor obtain his legitimately certified dues within a reasonable time?
Can a bank distinguish between wilful default and temporary stress caused by delayed government payments?
Can collateral coverage be applied consistently?
Can a genuine grievance be resolved without fourteen months of correspondence?
Can a government department comply promptly with a judicial order?
And can the PMO’s much-publicised grievance-redressal architecture ensure that a complaint does not simply travel from one desk to another without anyone taking ownership of the problem?
These are not unreasonable demands.
They are basic expectations from a system that claims to be entrepreneur-friendly.
Three changes that could make a difference
First, government-caused financial stress must be treated differently from wilful default, wherever the circumstances are demonstrable through contracts, certified bills, official records or judicial orders. The banking and credit framework should provide an appropriate mechanism for such cases, consistent with applicable RBI norms.
Second, banks must apply their own valuation and lending policies consistently and transparently. If collateral coverage qualifies a borrower for a particular interest category, the borrower should be told clearly why that category is or is not applicable.
Third, there must be a time-bound mechanism for government-payment-related MSME distress. Once an entrepreneur establishes that a government entity owes certified dues, the matter should not disappear into an administrative black hole. There should be accountability, escalation and a defined timeline.
The building stands. The entrepreneur struggles.
The most uncomfortable fact remains this:
The infrastructure was built. The public is using it. The work was completed. The Government’s liability was contested in court and, according to the entrepreneur, judicial directions were issued for payment.
Yet the entrepreneur who built that infrastructure is struggling to survive.
This is where slogans about entrepreneurship meet reality.
An MSME does not ask for charity.
It asks to be paid for the work it has completed.
It does not ask a bank to forgive a legitimate loan.
It asks for fair treatment under the bank’s own rules.
It does not ask the Government to bend the law.
It asks the Government to honour its obligations.
And it certainly does not ask for preferential treatment.
It asks not to be penalised for someone else’s failure to pay.
The entrepreneur in this case may ultimately win his battle. But the larger question remains for policymakers:
How many small businesses can India afford to lose because the system that was supposed to support them simply failed to recognise what was happening?
A nation aspiring to become a global economic powerhouse cannot build that future merely through large corporations and headline investment figures.
It needs its small entrepreneurs to survive.
Because when an MSME dies waiting for a government payment, the casualty is not merely one balance sheet.
It is confidence in the system itself.
(The author has chosen to remain anonymous. This is presented as a factual account based on the entrepreneur’s records and representations. No individual, institution or company is identified. Specific legal, banking and financial claims should be independently verified against the underlying documents before publication.)
