Panel seeks Rs 5,000 crore distressed asset fund, larger Mudra loans for MSMEs

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Published: June 26, 2019 12:30:09 AM

The committee, headed by former Securities Exchange Board of India (SEBI) chairman UK Sinha, has specified which authorities will be responsible for implementing each of its 37 recommendations.

msme, mudra schemeThe panel has asked for a revision in loan limit sanctioned under the Micro Units Development and Refinance Agency (Mudra ) scheme to Rs 20 lakh from Rs 10 lakh and an increase in the limit for non-collateralised loans to Rs 20 lakh.

A government-sponsored fund of funds (FoF) of Rs 10,000 crore, a distressed asset fund of Rs 5,000 crore and a higher loan limit under the Mudra scheme are among the recommendations of the expert committee on micro, small and medium enterprises (MSMEs) constituted by the Reserve Bank of India (RBI).

The committee, headed by former Securities Exchange Board of India (SEBI) chairman UK Sinha, has specified which authorities will be responsible for implementing each of its 37 recommendations.

The FoF will be meant to support venture capital (VC) and private equity (PE) firms investing in the MSME sector and support crowd funding from VC and PE firms which focus on investing in the MSME segment on modified term sheets developed by the Small Industries Development Bank of India (SIDBI). The distressed asset fund would be structured to assist units in clusters where a change in the external environment, for instance, a ban on plastics or ‘dumping’ has led to a large number of MSMEs becoming non-performing assets (NPA).

“This fund could then operate on the lines of the Textile Upgradation Fund Scheme (TUFS) which has been in existence over many years. This would be of significant size which makes equity investments that help unlock debt or help revive sick units,” the committee’s report said, adding that it is a variation of VCF, meant for equity investment of Rs 1 lakh to Rs 10 lakh in proprietary or partnership MSMEs, which will not or cannot list on stock exchanges.

The panel has asked for a revision in loan limit sanctioned under the Micro Units Development and Refinance Agency (Mudra ) scheme to Rs 20 lakh from Rs 10 lakh and an increase in the limit for non-collateralised loans to Rs 20 lakh.

It has also said that all credit guarantee schemes should be subject to the regulation and oversight of RBI. “These guidelines could draw upon the well acknowledged principle for design, implementation and evaluation of Public Credit Guarantee Schemes for SMEs which has been evolved by the World Bank Group,” the report said.

To tackle the issue of delayed payments to MSMEs, the committee has suggested reporting of all invoices above an amount to be specified by the government to information utilities (IU) set up under the Insolvency and Bankruptcy Code (IBC). “To begin with, this could be for invoices above Rs 1 crore,” the report observed, adding that a designated authority can then flag non-payments to the corporates concerned.

If the corporate then does not clear dues before the first working day of the next month, when the next statement will be generated, then the authority may send a communication to both the buyer and the seller that payment has not happened as evidenced by the IU in spite of a communication been sent to the corporate buyer. This communication could then be disclosed on the authority’s website for information of lenders, rating agency and other MSMEs as a means of naming and shaming, the committee said.

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