Stressed Asset Fund for MSMEs
Published: June 26, 2019
The U.K. Sinha committee constituted by the Reserve Bank of India (RBI) to study the problems faced by MSMEs has recommended constituting stressed asset fund for domestic micro, small and medium enterprises (MSMEs) as a relief to small businesses hurt by demonetization, the goods and services tax and an ongoing liquidity crunch.
Stressed Asset Fund
- The committee recommends the creation of a distressed asset fund, with a corpus of Rs 5,000 crore, structured to assist units in clusters where a change in the external environment, e.g. a ban on plastics or dumping has led to a large number of MSMEs becoming a non-performing asset(NPA).
- This fund would be used to make equity investments that help unlock debt or revive sick units.
- The fund must work in tandem with RBI-mandated restructuring schemes or bank-led NPA revival solutions for MSMEs.
- Instituting a government-sponsored Fund of Funds of Rs 10,000 crore to support venture capital and private equity firms investing in MSMEs.
- Constituting National Council for MSMEs at the apex level under the chairmanship of the Prime Minister, with the ministers for MSME, Commerce & Industry, Textiles, Food Processing, Agriculture, Rural Development, Railways and Surface Transport as members for the convergence of policies and creation of a promotional ecosystem.
- States must be encouraged to set up similar councils for MSMEs.
- PSBLoansIn59Minutes portal, which is catering to existing entrepreneurs must be allowed to serve new entrepreneurs including those applying for loans under the Pradhan Mantri Mudra Yojana and Stand-up India and the threshold of the loans should be enhanced to Rs 5 crore.
- All credit guarantee schemes such as the Credit Guarantee Fund Trust for Micro and Small Enterprises and National Credit Guarantee Trust Company must be subjected to RBI regulation and supervision.
MSMEs Backbone of Indian Economy
About 63.38 million MSMEs in India are contributing significantly to the country s economic growth. MSMEs accounts for about 45% of manufacturing output, more than 40% of exports, over 28% of gross domestic product and employs about 111 million people.
Topics: Credit Guarantee Fund Trust for Micro and Small Enterprises • demonetization • distressed asset fund • Goods and services tax • Liquidity Crunch • MSME • National Council for MSMEs • National Credit Guarantee Trust Company • Non-performing Asset • NPA • Pradhan Mantri Mudra Yojana • PSBLoansIn59Minutes • RBI • Reserve Bank of India • Sick Units • Stand-up India • Stressed Asset Fund • U.K. Sinha Committee