NBFC body urges Nitin Gadkari to include traders in MSME definition, extend Udyam registration deadline

By: |
June 20, 2021 4:03 PM

Credit and Finance for MSMEs: Retail and wholesale trade was included in the definition of “Services” under the MSME definition until 2017 when an office memorandum was issued that excluded wholesale and retail trade from the MSME definition, FIDC said.

Following MSME Ministry’s Notification in June 2020, RBI had issued a circular to its registered entities for mandatory Udyam Registration for MSME classification with effect from April 1 2021. (Representative image)

Credit and Finance for MSMEs: Finance Industry Development Council (FIDC), a representative body for assets and loan financing NBFCs catering to MSMEs, has urged MSME Minister Nitin Gadkari to include retail and wholesale trade in the list of activities allowed for registration as MSME. The suggestion was part of the representation made to the minister by the industry body earlier this week to boost credit flow to MSMEs followed by a letter reiterating the requests sent on Saturday to the minister. “Traders constitute around 35 per cent of total MSMEs in the country and are thus not eligible for liquidity support from the banking system and extension of priority sector benefits much needed for them,” the letter read. Copies of the letter and representation made were seen by Financial Express Online.

Retail and wholesale trade was included in the definition of “Services” under the MSME definition until 2017 when an office memorandum was issued that excluded wholesale and retail trade from the MSME definition, FIDC said. Consequently, RBI aligned its MSME definition in accordance with MSME Ministry’s notification dated June 2020, rendering retail and wholesale trade loans ineligible for priority sector lending and other scheme benefits. “While there is a need for synchronization of MSME definition across various platforms, we request that the retail and wholesale trade sector be specifically included in MSME definition in various RBI circulars, the representation noted.

FIDC also requested Nitin Gadkari to extend the deadline for MSMEs to register on the new government registration portal Udyam Registration till March 2022 from earlier April 1, 2021. Following MSME Ministry’s Notification dated June 2020, RBI had issued a circular to its registered entities and made Udyam Registration a mandatory document for MSME classification with effect from April 1 2021 for any scheme benefit, the representation said. The extension would help Covid-hit MSMEs who otherwise “would be deprived of various Government scheme benefits and the resulting revival of the economy.”

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Among other key asks were re-instating payout cap of CGTMSE scheme to three times of premium paid and recoveries remitted after CGTMSE in April this year reduced guarantee coverage from 75 per cent to 50 per cent, capped IRR at 18 per cent per annum, and reduced pay-out cap to two times of sum total of premium paid and recoveries remitted. “While the guarantee coverage and cap on IRR has since been re-instated vide circular no 181/ 2021-22 Dated 8, June 2021, the reduction in the pay-out cap is not reversed. Considering that NPAs have increased due to pandemic, reduction in pay-out cap makes it unviable for NBFCs to lend to MSMEs without guarantee support,” FIDC added.

The industry body also asked for an extension of the validity of the MSME Subvention Scheme for NBFCs for FY22. The scheme was launched by SIDBI in 2019 for two years and was later extended in October 2020 but for only scheduled commercial banks and co-operative banks and had left NBFCs outside its domain.

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