A grocer in Mumbai said distributors are not accepting cheques for larger sums mainly because banks, which are under-staffed due to the lockdown, are not clearing them. Some grocers do not have RTGS (real time gross settlement) facilities either.
While there has been a situation of stock unavailability post-lockdown, small grocers said they are finding it difficult to source supplies from company distributors due to liquidity issues. This is another reason why grocery stores have been under-stocked in the last few days.
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However, corporates like ITC, Hindustan Unilever (HUL) and Cargill are extending a helping hand in these challenging times.
Piyush Patnaik, managing director of Cargill’s oils business in India, said, “Kiranas will run into trouble due to two reasons — logistical problems in delivering stocks to them, and lack of cash in the market. Our distributors are extending credit to kiranas and we are doing it for our direct customers.”
An HUL spokesperson said the company expects the prolonged lockdown to impact the cash turnaround time of its distributors. “We will continue to evaluate the need for extending credit to our distributors from time-to-time and take appropriate actions in the best interest of our business and the partners with whom we work,” said the spokesperson. Previously, corporates had extended credit lines to their distributors during the demonetisation exercise in 2016.
Small retailers in Mumbai said some distributors, as a norm, do not accept cash beyond Rs 15,000-20,000, and now even cheques are not being accepted. These retailers said they were rushing to register for RTGS facilities — a process which can take a long while.
In Kolkata, some stores, mostly hyper-local, are facing problems procuring commodities from bigger stores and sell it with a small mark-up. However, relatively bigger kirana stores are in a better position. While most deal in cash, some are getting credit from distributors.
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There are around 12 million kirana stores in India, according to Nielsen, and close to a million wholesalers that make up the lifeline of the $650-billion retail industry. The relevance of small neighbourhood stores has remained steady given familiarity and proximity factors. Some even extend monthly credit to consumers.
Naren Sen, a hyper-local kirana store owner in Paikpara area of Kolkata, is facing a tough time for the last few days. “A lot of people in the neighbourhood are making purchases on credit, but we are not getting credit. The big stores and sub-distributors are not ready to accept cheques either,” he added. However, Milton Chakraborty, who has a relatively bigger grocery store in Kasba area in south Kolkata, is getting credit from distributors.
An industry executive said distributors of companies like ITC, which has a strong presence in kirana stores, is extending line of credit to these stores. “There is not much cash crunch at this moment, though most of the kirana stores do not have RTGS but they are getting credit,” the executive said.
In east Bengaluru, a majority of the neighbourhood stores remained shut on Friday due to lack of stock, and those that were open operated only between 7 am and 1 pm during the day due to low replenishments from distributors. All received their delivery last week and are waiting to refill as shelves remain half empty due to panic-buying by customers this week.
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“There has been no supply since last week,” said a kirana store owner, who pays his distributors in cash and online. “We are yet to reach a situation of paying by cheque or RTGS currently as that will only happen when the next cycle of delivery occurs,” he added.
A local ICICI branch manager said the bank has not received requests from any store owners for access to RTGS facilities. “It needs an approval from the RBI. Under the current situation, it is not likely they can leave their stores and come to the bank for that,” said the manager.
(Contributions by Namrata Singh in Mumbai, Udit Prasanna Mukherji in Kolkata, John Sarkar in New Delhi & Avik Das in Bengaluru)