MSMEs: Relief provided under IBC may be limited, credit guarantee to be doubled

The MSME secretary said credit guarantee of up to Rs 50,000 crore for the current fiscal year will be set up by the ministry for small scale industries. However, relief proposed under the provisions of Section 29A that disqualifies certain persons from bidding for an insolvent company might be done away with.

With an aim to tackle trade finance woes of micro, small and medium enterprises (MSMEs), the Union Government announced that it would double the credit guarantee up to Rs 50,000 crore for 2018-19 under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme set up by the MSME Ministry, a top official said at an Assocham event held in New Delhi last week.
 
"We have taken some decisions, we are allowing non-banking financial companies (NBFCs) partial collateral and this year, unlike previous years where, from fund we used to guarantee a credit flow of Rs 19,000-20,000 crore every year for last three years, we plan to cross Rs 40,000 crore, it may touch Rs 50,000 crore," MSME secretary A K Panda said at an Assocham conference on "Role of Trade Finance".
 
Furthermore, Panda claimed that the MSME Ministry has taken certain concrete steps as part of structural reforms, and is thus expecting about four lakh such credit proposals.
 
To ensure credit availability to MSMEs for inclusive growth, the Ministry is also holding discussions with all banks and NBFCs and is planning that 70,000 units giving employment generation to almost 5 lakh people be taken up this year itself.
 
MSMEs comprise about 95-96 per cent out of the one crore firms registered in the Goods and Services Tax Network (GSTN), the secretary said that it is more than the 47 lakh MSMEs registered under the Ministry’s Udyog Aadhaar Memorandum. 
 
As per him, there is need for a database to communicate with them and to tell them about the facilities that they can avail.
 
The secretary further noted that in order to ensure credit flow for MSMEs is up to the expectation, gaps are bridged and their problems are addressed, the ministry is holding discussions with the Reserve Bank of India (RBI) about promoting FinTech companies who can reach out much better to MSMEs across India than the scheduled commercial banks.
 
The government, however, is likely to limit relief proposed earlier for micro, small and medium enterprises (MSMEs) from the provisions of Section 29A that disqualifies certain persons from bidding for an insolvent company.
 
The revised ordinance, which proposes changes to the Insolvency and Bankruptcy Code (IBC), will also include a provision to allow participation by promoters released from imprisonment six years before the date of submission of a resolution plan, a senior official told ET. 
 
The exemption for MSMEs from the provisions of Section 29A has been considered after it was found there was little investor interest in MSMEs apart from promoters.
 
Source: Media reports

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