Factoring Regulation (Amendment) Bill passed by the Lok Sabha for expediting payment to the MSMEs by the Government
On Monday, the Lok Sabha passed an amendment bill which is the Factoring Regulation Bill, 2020 for amending the Factoring Regulation Act of 2011. This bill was initially introduced the previous year in September with the intent of helping MSMEs or micro, small and medium enterprises on the issue of delayed payments for increasing the participation of the various entities undergoing factoring. This bill will also likely increase the traction of the TReDS platform which was actually introduced by the RBI in 2014 for its entrepreneurs for unlocking the tide of working capital for the unpaid invoices.
As per the monitoring portal of MSME Samadhan, which is the agency monitoring the delayed payments to the MSMEs government, greater than 83,000 applications for delayed payment have been filed by the MSMEs till July 26, 2021 which amounts to around Rs 22,311 crore from which around 7,900 applications that amounting to around 1400 crore have been disposed. So with the introduction of this new bill, it will in turn, help both the government and the MSMEs in a faster payment system.
Updated Date: 04-08-2021
Economic slowdown due to pandemic
Studies and surveys show around 95% of firms were impacted in April 2020. Even with progressive unlocking, things have remained unchanged. Disruption was observed in around 70% of businesses.
While the business volume of Indian MSMEs declined by an average of 11% in 2021, a 46% decline was observed in the year 2020 due to lockdown. According to the All-India Manufacturers Organisation survey, 35% of the MSMEs sector are in no condition to recover.
Reasons for losses faced by MSMEs
- The absence of proper transaction details makes it difficult for MSMEs to access loans.
- The high cost of transactions affects a company’s profit margin.
- Absence of high credit score and collaterals. A high-interest rate also creates problems for MSMEs to access loans.
- Vulnerability towards cybercrimes due to lack of knowledge about handling transaction data.
Factors to strengthen MSMEs
- Better credit facility
- Better marketing support
- Adoption of technology
- Government should provide soft loans with a longer term of repayment to support MSMEs.
The recovery of small enterprises is necessary to achieve the required economic growth.
Updated Date: 15-11-2021
How DIGITIZATION can enhance revival for Indian MSMEs? Experts answer
“We have given salaries on time,” Mr. Naushad, who is the MD of Walkaroo International, stated. He further added that this has boosted the morale among the employees of his company. He said that his company gets its stitching job done by outsourcing it to about two hundred micro enterprises who themselves are fighting tough times. He said that his company is extending support by all means to these micro entrepreneurs.
June 27 is observed as MSME Day every year by the United Nations since 2017. Mr. Naushad was present on this very day at the panel discussion on the topic ‘How Traditional SMEs Can Embrace Digitization’ to enhance their post-Covid revival.
Date Updated: 26-07-2021
Banks ordered to clear all pending MSME loans by end of October
Additional Chief Secretary, Navneet Sehgal recently said that the implementation of the second loan scheme for the upgradation of units under the employment generation programme is slow as the rules were complicated.
During the committee meeting of the PMEGP, he also pointed out the fact that while loans of 3,267 units have been approved, the release of their margin is pending. There have been around 7,700 applications that are still pending, and Mr. Sehgal has asked the banks to clear all claims by 31st October. So far 37% of the claims have been distributed
Updated Date: 20-10-2021
Emergency Credit Scheme for MSME’s extended till the end of March 2022 by Government
The Coronavirus pandemic has affected the MSME sector severely. Several MSME sector businesses collapsed due to loss of revenue as a result of the various restrictions that were implemented by the Government for the safety of the citizens. The Government announced the Emergency Credit Line Guarantee Scheme (ECLGS) to offer them support for survival. Recently, the decision has been taken to extend the same till the end of March 2020 with some modifications. Businesses who haven’t availed of ECLGS can avail upto 30% of credit outstanding as of 31st March 2021 while some businesses have been listed eligible to 40% of the same. Incremental credit can also be availed within these limits by existing ECLGS borrowers because of change in cut-off date.
Updated Date: 11-10-2021
MSME manufacturers seek low-interest rates and faster policy implementation to boost recovery
In May 2020, the government had capped interest rates at 9.25 % for collateral-free loans provided by banks and financial institutions and at 14% for loans provided by the Non-Banking Financial Institution (NBFC).
Since then, the MSME manufacturers have gone through a lot of turmoil and since things are a bit steady now, the manufacturers in various sectors like metal, capital goods, toymakers, etc. are seeking faster implementation of government policies meant for their recovery along with a cap on the maximum interest rate that can be charged to the MSME’s so that they are set on the path to recovery.
Updated Date: 24-09-2021
7,000 Jobs To Be Available With Four New MSME Industrial Clusters
The Tamil Nadu Government has announced a major reform. It is expected to change the lives of people who lost everything during the Covid-19 pandemic.
The Tamil Nadu Small Industries Corporation Limited has confirmed that it will set up four new MSME Industrial Clusters under the guidance of the Tamil Nadu Government. The units will be established in Chengalpattu, Trichy, Tiruvallur, and Madurai. It is estimated to cost around ₹218.22 crores to the Government. The money spent will be worth it as it will generate 7,000 jobs in the state. T M Anbarasan, the Minister of Rural Industries, assured that the fact was true.
The Coimbatore Sidco Industrial Estate Manufacturer’s Association is set to put a cherry on the cake. It has announced that it will also contribute to the direction of generating employment. It has committed to establishing a private industrial park with the assistance of ₹9.06 crore. It will receive the money from the Tamil Nadu Government in the form of a grant.
Updated Date: 14-09-2021
Nirmala Sitharaman Has Launched New Funds for MSMEs
The Union Finance Minister of India, Nirmala Sitharaman, has launched the Ubharte Sitaare Fund. The fund targets entrepreneurs who are operating in micro, small, and medium enterprises. The responsibility to spread awareness about the fund has been laid on Sidharth Nath Singh, the state’s MSME Minister. He has accepted the responsibility and plans to implement it by setting up MSME chambers in various districts.
While launching the fund, Nirmala Sitharaman said that the Modi Government had been working for the MSME sector for a long time. It first gave the MSME sector a proper definition. Now, with the announcement of the fund, the Government has rightfully given the sector its much-deserved place. The Ubharte Sitaare Fund, set up by Exim Bank & SIDBI, is expected to make India a major hub of exports. A company will be identified under the Ubharte Sitaare Programme (USP) only if it shows potential to fulfill global demands in the future.
Updated Date: 06-09-2021
The special financial package for MSMEs
The MSME (Micro, Small and Medium Enterprises) sector has been severely hit by the Covid-19 pandemic as when lockdowns were imposed, business stopped altogether and even today there are several restrictions and barriers that these businesses have to go through. The Union Minister for the MSME Sector said that his team has been making all efforts possible for the revival and betterment of the MSME sector and during a recent meeting he also informed that a special financial package for businesses under this sector was going to be introduced. The support of the government, subsidies on interest rates of loans, etc are necessary for the upliftment of the MSME sector.
Updated Date: 23-08-2021
MSME among top 9 sectors to benefit the most from, post Finance Ministers announcement
On June 28, Finance Minister Nirmala Sitaraman announced 8 economic relief measures in order to revive the economy that has been hit severely by the pandemic. Out of these 8 measures, 4 are extensions of the previous measure like an addition of INR 1.5 lakh Crore to the Emergency Credit Line Scheme and 4 are completely new, either ways, these schemes would benefit sectors like MSME, tourism, hospitality, NBFCs, healthcare, and IT.
These measures come at a time when the Covid cases are declining and the worst hit sectors are recovering to provide support to these sectors. The Stock Market on the other hand is near an all-time high and is likely to play an important role in the recovery of the economy.
The announcement stressed at the recovery of the worst hit sectors that have been MSME, travel and tourism and the schemes would aim to create a recovery map for them as these sectors are still struggling due to the currently imposed restrictions.
The announcements included the extension of the Atmanirbhar Bharat Rozgar Yojana, the free tourist visa scheme and an additional 1.5 lakh crore to the ECLGS.
Update Date: 05-07-2021
A rise of 40% in loan disbursement for MSME sector in FY21
TransUnion Cibil MSME Pulse Report states that this year, i.e., in FY21 lenders have distributed loans worth ₹9.5 trillion to various micro, small and medium Entrepreneurs (MSMEs), as much as 40% higher than the previous year’s ₹6.8 trillion, showed findings from the most recent edition of the Sidbi.
The report states that this surge came into existence due to a government like Emergency Credit Line Guarantee Scheme (ECLGS).
Previously, the total lending exposure in on-balance commercial sheets in India was ₹74.36 trillion in the month of March, with a Y-o-Y growth rate of about 0.6%. Credit exposure for MSMEs was ₹20.21 trillion in March, a year-on-year growth of 6.6%, as the report stated.
It also stated a huge surge in credit demand after the unlocking of the economy post both the waves of the pandemic. Initially there was a drop in enquiries on commercial credit by 76% at the time of the first wave, but it recovered quite fast after the backing by ECLGS and have thereby sustained close to levels what it was before the pandemic, it said.
Update Date: 11-08-2021
Finance Minister Nirmala Sitahraman to monitor the process for clearing MSME dues within a span of forty five days
On Monday, replying to a question in the Lok Sabha, Union Finance Minister, Nirmala Sitharaman repeated the words of the Central Government that they would be clearing all the dues of the MSME’s within a span of 45 days. Sitharaman said that she would personally monitor this process. She further added that when they are speaking of the MSMEs dues, it is not only central government or central PSU dues but also state government and state PSU dues that needs to be cleared. So, the GST council would be taking the final decision for including the states in its schemes.
MSMEs have played an important role in making India’s economy stronger by contributing 29 per cent to the GDP or Gross Domestic Product of the country and currently more than 11 crore people are employed by the MSMEs. Under the Emergency Credit Line Guarantee Scheme or ECLGS, the central government would be offering an amount of Rs 2.73 lakhs which would be given to around 1.09 crore MSMEs. This scheme is 100 percent backed by the central government.
Updated Date: 04-08-2021
The new definition of MSME that includes traders – retail as well as wholesale:
On the day of July 7, RBI asked all banks, Non-Banking Financial Companies (NBFCs) and financial institutions to redefine wholesale and retail traders as MSMEs to keep in accordance with revised criteria.
On 2nd July, Mr. Nitin Gadkari, Minister of MSME, announced that from now onwards, both retail and wholesale traders will be included in MSME for the sole limited cause of Priority Sector Lending, The central bank communicated to all banks that as loans disbursed to MSMEs fall under the PSL ambit and in accordance with the guidelines of RBI, all commercial banks are required to avail forty percent of the total lending to the priority sector whereas, for the small finance banks and regional rural banks, the PSL target is set at seventy-five percent of the total lending.
It further added that all those retail and wholesale traders who are in following trades namely – “Retail and Wholesale trade and repairing of motorcycles and motor vehicles with NIC code 45”, “Wholesale trade excluding of motorcycles and motor vehicles with NIC code 46” and “Retail trade excluding of motorcycles and motor vehicles with NIC code47” be permitted to register themselves on Udyam Registration Portal.
Previously, enterprises dealing in the service and manufacturing were considered as MSMEs because in June 2017, the government had removed wholesale and retail traders from the category of MSMEs.
Initially wholesale and retail businesses were covered under the definition of MSMEs according to the 2006 Act. But for reasons unknown, in 2017, the Central Government removed these traders from the MSME list saying that these entities were involved neither in manufacturing nor in service. Hence these traders could not get the benefits of MSME loans. But now with the redefinition of MSME, both retail and wholesale traders can reap the benefits that MSMEs can avail of.
Date Updated: 12-07-2021
90% of Rs 3 lakh Crore under Emergency Credit Line Scheme granted
As per a report by Crisil, banks have already lent around 90% of the 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) which was announced last year to support the small businesses during the 1st wave of the pandemic and the nationwide lockdown. So far, loans around INR 2.69 lakh crore have been disbursed under this scheme.
On Monday, the government decided to expand the Scheme value by another 1.5 lakh Crores, which as per Crisil could help alleviate the potential stress on asset quality of banks arising from the second wave of the pandemic.
The scheme has helped the MSME sector a lot and the banks as well as the scheme, coupled with steps like the loan moratorium and loan resolution framework has assisted contain banks gross non-performing assets at 7.5 % which is a lower value than that of March 2020.
Crisil feels that expanding the ECLGS value by 1.5 lakh crore would provide much needed support to the small companies and businesses which are the vulnerable segments of economy. During the times of this pandemic, with the second wave on the decline and the third wave not far, away it is best to ensure that the economy is strengthened enough to bear the wave at its full might.
Updated Date: 05-07-2021
Odisha to Introduce MSME Census to Revive the Collapsing Sector
The Odisha Government, with a view to boost the MSME sector, plans to conduct an MSME census. This, it believes, will help it frame policies aimed at boosting the same. MSME sector is the worst affected during the pandemic. The effort aims to identify the challenges MSMES faced at the time. Some of them include:
- Availing credit guarantee
- Raw materials
- Tax-related problems
- Legal formalities
- Marketing of the final products
There is also three-year planning at the district level with the district collectors and others involved in the matter. This will help bring 25000 MSMEs under the Prime Minister’s Employment Generation Program, the Government hopes.
According to Satyabrata Sahu, the principal secretary of the MSME Department, the entrepreneurs here sustained the economy even during the pandemic. The Government also plans to change women ShGs to micro-entrepreneurs that focus on the field of packaging. With this in mind, the Government plans to rope in innovators in the sector. 0000The State also plans to utilize the central schemes in the field to the maximum.
The State leads in the Eastern region by sanctioning a maximum number of projects. It is also the second in the country in this regard.
Updated Date: 01-07-2021
World Bank approves funding of 500 million USD for 5.5 lakh firms under India’s MSME programme
Nearly a year after the 750 million USD provided as a part of the MSME Emergency Response Programme for the resurrection of the Covid-19 hit MSME sector of India. The World Bank has agreed to provide another funding of USD 500 million so as to help the companies that come under the MSME sector revamp and start accelerating towards projected goals while making giant strides in terms of progress and development thereby contributing in improving the economic condition of India as a part of the bigger picture.
The 500 million dollar loan is aimed to support 5.5 lakh firms in India that have struggled due to the pandemic and the loan has a maturity 18.5 years including a grace of 5.5 years. The World Bank also decided to set up an MSME Council for good coordination and to ensure proper utilisation of the funds. The Council would come up with investment plans for the companies that fall under the MSME sector and provide them with growth plans as well as ideas to get their services more value in the market by increasing their scale of exposure and providing them working capital.
Updated Date: 14-06-2021