Credit and Finance for MSMEs: YSR (Yuvajana Shramika Rythu Congress Party) Congress parliamentary party leader V. Vijayasai Reddy urged the central government to support MSMEs by extending the time limit for credit repayment from the current 90 days to 180 days.   

The appeal to reevaluate the 90 day period to repay loans was made as a special mention in the Rajya Sabha on Tuesday for consideration in the upcoming budget. 

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“The limit is irrational because the working cycle of most MSMEs exceeds 90 days. Since MSMEs don’t receive timely payments from the buyers they are unable to repay loans within time and end up defaulting,” said Reddy while sharing the financial stress the MSME sector is reeling under. 

He added that as a result of the rising NPAs the banks have become conservative in their approach and are reluctant to give them credit.

“Through a Special Mention in RS today, I urge the government to improve credit facilities to the MSME sector which accounts for 27% of GDP and has been struggling in repaying the loans,” Reddy wrote in a tweet. 

Another key issue plaguing the growth of MSMEs is outdated technology. MSMEs are unable to get institutional finance for upgrading technology due to discontinuation of Credit Linked Capital Subsidy Scheme for Technology Upgradation, he said. 

The CLCSS was launched to facilitate technology upgradation in MSEs by providing an upfront capital subsidy of 15 per cent for incorporating improved technology in their business. The scheme  was discontinued through a government circular last year and the MSME Champions scheme for small businesses was launched in its place. 

The MP appealed to consider reviving ther CLCSS scheme in the next budget to enable MSMEs become globally competitive. 

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Highlighting the shortcomings of the Champions Scheme, he said that it is not exclusively targeted at technology upgradation and hence it has not been able to address the technology deficit in the MSME sector. 

According to MSME Annual Report, MSMEs contribute up to 27 per cent to the country’s Gross Domestic Product (GDP), 45 per cent to the country’s exports and create jobs for 11 crore people.