MSMEs in India -Opportunities, Issues and Challenges
The MSME sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. It contributes significantly in the economic and social development of the country by fostering entrepreneurship and generating the largest employment opportunities at comparatively lower capital cost, next only to agriculture. It has played a crucial role in not only providing large employment opportunities and increasing exports but also in promoting industrialisation of rural and backward areas, thereby reducing regional socio-economic imbalances. MSMEs are complementary to large industries as ancillary units, and this sector contributes significantly in the inclusive industrial development of the country. The UN General Assembly in its 74th Plenary held on April 6, 2017 declared June 27 as MSMEs Day, recognising the importance of MSMEs in achieving sustainable development goals and in promoting innovation, and sustainable work for all. MSME defined MSMEs are defined under Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006), on the basis of the original cost of investment in plant and machinery / equipment as mentioned in Table 1. The Government of India (GoI) has introduced the Bill to redefine MSMEs from ‘investment in plant and machinery / equipment’ to ‘annual turnover’ as follows: • A Microenterprise will be defined as a unit where the annual turnover does not exceed INR 5 crores. A Small enterprise will be defined as a unit where theannual turnover is more than INR 5 crore but does not exceed INR 75 crore. • A Medium enterprise will be defined as a unit where the annual turnover is more than INR 75 crore but does not exceed INR 250 crore. After passing of the Bill in the Parliament, Section 7 of the MSMED Act, 2006 will accordingly be amended to define units producing goods and rendering services in terms of annual turnover as above
Mission to redefine MSME
Taking turnover as a criterion can be pegged with reliable figures available eg in GST Network and other methods of ascertaining which will help in having a non-discretionary, transparent and objective criteria and will eliminate the need for inspections, make the classification system progressive and evolutionary, help in overcoming the uncertainties associated with the classification based on investment in plant and machinery / equipment and employment and improve the ease of doing business and the consequent growth and will pave the way for
increased direct and indirect employment in the MSME sector of the country. It has also received criticism, to redefine MSME on the turnover basis, on the ground that: • It will end the distinct identity of the MSME; • There should be an arm’s length to the large industry so that MSME can evolve with all support from the government; • Nowhere in the world, turnover is the sole criterion to define MSME. MSME in Indian Economy – Potentialities for growth and opportunities Globally, the MSMEs segment plays a crucial role in employment generation and contributes significantly to overall economic activity. In India, the MSME sector: • Constitutes a vast network of over 63 million units. • Employs around 111 million people. • The share of MSME in overall GDP is around 30 percent (GoI,2018). • Contributes 40 percent of total exports of the country. • Accounts for 45 percent of manufacturing output. MSMEs, as above, have significantly contributed to the development of Indian economy. MSMEs have greater opportunities to grow as ancillary industries to unleash higher industrial growth. MSMEs being less capital intensive and more employment-friendly have easier access to raw-materials, subsidies and other incentives under cluster programmes. Development of this sector is, therefore, extremely important as it holds the key to inclusive growth and plays a pivotal role in the economic development of the country. The MSME sector has the potentialities to emerge as the backbone of the Indian economy and to continue as an engine of growth, must be provided with an environment-friendly policy framework and enabling infrastructural support. MSME issues Credit flow to MSMEs As per a quarterly report by Transunion Cibil and Small Industries Development Bank of India (SIDBI), the overall credit to the MSME segment grew 16.1 percent for the year to June 2018, in which, PSBs reported a growth of 5.5 percent, compared with 23.4 percent for the private sector competitors. Data given in Chart 2 and Chart 3 reveal that the credit to MSME has shown an increasing trend during and after 2017. As per the (Mint Street Memo No 13) RBI report dated August 17, 2018, credit growth in the MSME sector had started decelerating even before demonetisation and declined further during the demonetisation phase. In contrast, GST implementation does not seem to have had any significant impact on credit. Overall, MSME credit and especially microcredit to MSMEs including loans by banks and NBFCs shows a healthy rate of growth in recent quarters. During the quarter April-June 2018, bank credit to MSMEs increased on average by 8.5 percent (y-o-y). The Reserve Bank of India (RBI) observed ‘Despite significant contribution to economic growth, MSMEs face several bottlenecks inhibiting them from achieving their full potential. A majorobstacle for the growth of MSMEs is their inability to access timely and adequate finance as most of them are in niche segments where credit appraisal is a major challenge. The challenges faced by MSMEs in accessing finance are due to lack of comprehensive formal documentation relating to accounts, income and business transactions. As a result, loans are provided to the MSMEs mainly through the appraisal of their collaterals rather than assessing their true business potentials. Further, banks do not trust start-ups, view such loans as risky and thus do not prefer extending finance to MSMEs’. (RBI CIR-Aug 18) (2) Private Banks, NBFCs outdo PSBs in lending to SMEs In a study conducted by Transunion Cibil, it is found that there has been an increase in the Turn-Around Time (TAT) for loan processing across all the three segments as mentioned in Table 3:
In order to improve the TAT for processing of MSME loan proposals, the Finance Minister on 25thwww.psbloansin59minutes.com September, 2018 while reviewing the performance of PSBs announced a common online portal for MSMEs credit space. ‘The web portal () will enable in principle approval for MSME loans up to INR 1 crore within 59 minutes, without entrepreneurs having to visit branches, from SIDBI and five Public Sector Banks (PSBs)’. From the Chart 4, 5a and 5b data, it is indicated that : • The share of Scheduled Commercial Banks (SCBs) to MSME credit has shown a declining trend; whereas the share of NBFCs has an increasing trend. (Chart-
4) • The share of PSBs has a declining trend vis-à-vis an increasing trend revealed by private sector banks. • The share of credit extended to MSMEs in overall bank credit declined steadily to around 14 percent by end-March 2018 from about 17 percent in 2007. This could be partly due to over-lending to large corporates (now stressed) in the second half of the 2000s. Additionally, within the credit to the industrial sector, the share of credit to medium enterprises has dropped significantly as compared to the share of micro and small enterprises .From from the data collected by Transunion Cibil and SIDBI, the share of 21 PSBs has fallen to 50.7 percent as of June 2018, from 55.8 percent in June 2017 and 59.4 percent in June 2016. (3) Non-Performing Assets (NPAs) From the data in chart 6, it is clear that the growth of credit by PSBs during the past three years has declined. Conversely, the NPAs has increased. The credit growth was 7 percent, and NPA increase was 13.1 percent. In the case of Private sector banks, the credit growth toMSME sector registered 14.3 percent, and NPA level is contained at a manageable level of 2.7 percent. As per the data obtained by Transunion Cibil, despite aggressive growth, private sector banks and NBFCs far better on asset quality as well. The PSBs (NPAs) from the MSME book increased to 15.2 percent (June 2018) from 14.5 percent(June 2017), while in case of private sector banks, the ratio decreased marginally to 3.9 percent in June 2018 from 4 percent in June 2017. (4) Documentation Many of the MSMEs, particularly the Micro units, do not have adequate documentation to match the rigours of a formal financial system. The absence of documentation drives the small entrepreneurs to informal sources that are willing to provide credit with minimum documentation. Further, a vast majority of the MSMEs are informal, which brings down the credit score of the entrepreneur and hinders the ability of the formal financial system to lend to them. Banks, on their part, will need to leverage modern technology algorithms and big data so that they can differentiate between a good borrower and not so good one even in the absence of conventional documentation.Documentation has now, of late, not posed a problem since most of the banks have adopted simple common loan application forms for extension of credit facilities to MSMEs up to credit limit of INR 2 crore.Further, Financial Literacy Centre (FLC) have been started by different banks which help in capacity building in existing and potential entrepreneurs.Similarly, (RSETIs) Rural Self Employment Training Institutes, is initiated as an initiative of Ministry of Rural Development (MoRD) to have dedicated infrastructure in each district of the country to impart training and skill upgradation of rural youth geared towards entrepreneurship development. RSETIs are managed by banks with active co-operation from the GoI and State Governments. MSME – Challenges: In spite of substantial contributionsmade by MSME enterprises for the development of the economy, they face following common challenges which prove obstacles in the path of their growth and development: 1. Lack of adequate capital and credit. 2. Poor and inadequate infrastructure. 3. Market access. 4. Lack of skilled human resources. 5. Inadequate access to new technology. 6. Cumbersome regulatory practices. MSME challenges – A breather Following are some of the solutions provided by GoI, RBI, Ministry of MSME, Banks and others for mitigating the challenges of MSME: 1. Capital is the lifeblood of business. Without adequate capital and credit, MSME units will either not come forward or die prematurely. (a) Now MSME units are provided with working capital facility @ 25 percent of turnover and in case of MSME units that transact digitally @ 30 percent of turnover instead of 20 percent earlier. (b) Guarantees are provided by Credit Guarantee Trust Micro and Small Enterprises (CGTMSE) for extending collateral free lending to MSMEs through Banks and financial institutions (Fis) including NBFCs.
(c) ‘Credit Linked Capital Subsidy Scheme (CLCSS)’ provides a capital subsidy on institutional finance. (d) Various credit rating agencies like Small and Medium Enterprises Rating Agencies (SMERA) has been established for a rating of MSME units which help banks in the assessment of credit facilities. Such ratings also enable MSME units to get interest concessions from various banks and Fis. (e) In terms of the recommendations of the Prime Minister’s Task Force on MSMEs, banks are advised to achieve: • 20 percent year–on–year growth in credit to micro and small enterprises; • 10 percent annual growth in the number of microenterprise and accounts; and • 60 percent of total lending to the MSE sector as on corresponding quarter of the previous year to microenterprises. (f) As per the RBI guidelines, banks are mandated not to accept collateral security in the case of loans up to INR 10 lacs extended to units in the MSE units. Further, banks may, on the basis of good track record and financial position of the MSE units, increase the limit to dispense with the collateral requirement for loans up to INR 25 lacs (with the approval of the appropriate authority). (g) A composite loan limit of INR 1 crore can be sanctioned by banks to enable the MSE entrepreneurs to avail of their working capital and term loan requirement through Single Window. The Ministry of MSMEs has vide their GazetteNotification dated May 29, 2015 had notified a ‘Framework for Revival and Rehabilitation of MSMEs’ to provide a simpler and faster mechanism to address the stress in the accounts of MSMEs and to facilitate the promotion and development of MSMEs. 2. (a) SFURTI – Scheme of Fund for Regeneration of Traditional Industries is the scheme to organise traditional industries and artisans into clusters to make them competitive and provide support for their long term sustainability. (b) Scheme for Micro and Small Enterprises Cluster Development Programme (MSE-CDP): The Ministry has adopted the cluster development approach as a key strategy for enhancing productivity and competitiveness as well as capacity building of MSEs. 3. The government has introduced a flexible growth stimulating and artisan oriented Market Development Assistance (MDA) scheme, in place of the erstwhile system of Rebate. Under MDA, financial assistance is provided to the institutions @ 20 percent of the value of production of khadi and polyvastra, to be shared among artisans, producing institutions and selling institutions in the ratio of 40:40:20. As a boost for marketing assistance, Special Marketing Assistance Scheme (SMAS) has been launched in which SC / ST entrepreneurs shall be allowed reimbursement under SMAS for a maximum of 2 international events and four domestic events in a financial year. 4. Under the Ministry of MSME, A Scheme for Promotion of Innovation, Rural and Entrepreneurship (ASPIRE) has been developed to: • Create new jobs and reduce unemployment; • Promote entrepreneurship culture in India; • Grassroots economic development; • Facilitate innovative business solution for unmet social needs; and • Promote innovation to strengthen the competitiveness of the MSME sector. National Small Industries Corporation (NSIC) is an ISO 9001-2008 certified Government Enterprise under Ministry of MSME is a premier organisation fostering the growth of MSMEs. It promotes and supports MSMEs by providing integrated support services encompassing, Marketing, Finance, Technology and other Services. National Institute for MSMEs (NIMSME) has been in existence since 1960. Enterprise promotion and entrepreneurship development being the central focus of NIMSME’s functions, the Institute’s competencies converge on the following aspects:
• Enabling enterprise creation • Capacity building for enterprise growth and sustainability • Creation, development and dissemination of enterprise knowledge • Empowering the underprivileged through enterprise creation. While inaugurating the Udyam Sangam – 2018 in New Delhi on International MSME Day 2018, the President of India Ram Nath Kovind launched Udyam Sakti portal of the MSME Ministry and said that it would empower women and weaker sections by providing training to 80 lac women. 5. The Ministry of MSMEs, GoI has launched on 18th October, 2016 a new scheme ‘Financial support to MSMEs in ZED Certification scheme’ for the benefit of MSMEs. The scheme envisages promotion of Zero Defect and Zero Effect (ZED) manufacturing amongst MSMEs for developing an ecosystem for Zero Defect manufacturing in MSMEs, promoting adaption of quality tools / systems and energy efficient manufacturing without impacting the environment. 6. (a) To enable ease of registration of MSMEs, the Ministry of MSME has notified a simple one-page registration form ’Udyog Aadhaar Memorandum’ (UAM) on 18th September, 2015. (b) To facilitate the enterprises to take benefit of various schemes by the Office of Development Commissioner (MSME), his office has launched a web-based application module, namely, MyMSME. (c) The Ministry has started an MSME internet grievance monitoring system (e-SAMADHAN) to track and monitor other grievances and suggestions received in the Ministry. MSME SAMADHAAN launched on8th December, 2017 under the MSMED Act, 2006 deals with addressing the issues relating to the Delayed Payments to MSEs by the buyers to the MSE supplier. (d) MSME-SAMBANDH: The Ministry of MSMEs MSME-SAMBANDH launched on 8th December, 2017 notified the public procurement policy for MSMEs which mandates 20 percent of annual procurement from MSEs including 4 percent from enterprises owned by SC / ST entrepreneurs by the Central Ministries / Departments of Central Public Sector Enterprises. (e) Banking Codes and Standard Board of India (BCSBI) prepared code in place in 2008 and revised in 2015 in which it sets minimum standards of banking practices for banks to follow while dealing with MSEs. (f) Banking Ombudsman Scheme: Within 30 days of lodging a complaint with the bank, if MSEs do not get a satisfactory response from a bank and MSEs wish to pursue other avenues it may approach Banking Ombudsman. Conclusion MSME sector is a platform of nursery for entrepreneurship development and a school of innovation. Countless medium and large corporates in India have evolved out of being micro and small entrepreneurs. MSME sector is crucial for the success of the national agenda of Financial Inclusion. Technology and innovation will continue to play a pivotal role in creating a businessfriendlyatmosphere for the MSMEs. This sector has exhibited enough resilience to sustain itself on the strength of our traditional skills and expertise and by infusion of new technologies, capital and innovative marketing strategies and possesses enough potential and possibilities for accelerated industrial growth in our developing economy and well poised to support various national programmes like ‘Make in India’. All stakeholders – whether banks, MSME firms or the policymakers- must make efforts in their respective domains to seize the opportunity that the MSME sector provides. For a healthy and mutually beneficial relationship between the banks and borrowers, it would be essential for both parties to understand and appreciate each other’s point of view and work proactively.
The MSME sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. It contributes significantly in the economic and social development of the country by fostering entrepreneurship and generating the largest employment opportunities at comparatively lower capital cost, next only to agriculture. It has played a crucial role in not only providing large employment opportunities and increasing exports but also in promoting industrialisation of rural and backward areas, thereby reducing regional socio-economic imbalances. MSMEs are complementary to large industries as ancillary units, and this sector contributes significantly in the inclusive industrial development of the country. The UN General Assembly in its 74th Plenary held on April 6, 2017 declared June 27 as MSMEs Day, recognising the importance of MSMEs in achieving sustainable development goals and in promoting innovation, and sustainable work for all. MSME defined MSMEs are defined under Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act, 2006), on the basis of the original cost of investment in plant and machinery / equipment as mentioned in Table 1. The Government of India (GoI) has introduced the Bill to redefine MSMEs from ‘investment in plant and machinery / equipment’ to ‘annual turnover’ as follows: • A Microenterprise will be defined as a unit where the annual turnover does not exceed INR 5 crores. A Small enterprise will be defined as a unit where theannual turnover is more than INR 5 crore but does not exceed INR 75 crore. • A Medium enterprise will be defined as a unit where the annual turnover is more than INR 75 crore but does not exceed INR 250 crore. After passing of the Bill in the Parliament, Section 7 of the MSMED Act, 2006 will accordingly be amended to define units producing goods and rendering services in terms of annual turnover as above
Mission to redefine MSME
Taking turnover as a criterion can be pegged with reliable figures available eg in GST Network and other methods of ascertaining which will help in having a non-discretionary, transparent and objective criteria and will eliminate the need for inspections, make the classification system progressive and evolutionary, help in overcoming the uncertainties associated with the classification based on investment in plant and machinery / equipment and employment and improve the ease of doing business and the consequent growth and will pave the way for
increased direct and indirect employment in the MSME sector of the country. It has also received criticism, to redefine MSME on the turnover basis, on the ground that: • It will end the distinct identity of the MSME; • There should be an arm’s length to the large industry so that MSME can evolve with all support from the government; • Nowhere in the world, turnover is the sole criterion to define MSME. MSME in Indian Economy – Potentialities for growth and opportunities Globally, the MSMEs segment plays a crucial role in employment generation and contributes significantly to overall economic activity. In India, the MSME sector: • Constitutes a vast network of over 63 million units. • Employs around 111 million people. • The share of MSME in overall GDP is around 30 percent (GoI,2018). • Contributes 40 percent of total exports of the country. • Accounts for 45 percent of manufacturing output. MSMEs, as above, have significantly contributed to the development of Indian economy. MSMEs have greater opportunities to grow as ancillary industries to unleash higher industrial growth. MSMEs being less capital intensive and more employment-friendly have easier access to raw-materials, subsidies and other incentives under cluster programmes. Development of this sector is, therefore, extremely important as it holds the key to inclusive growth and plays a pivotal role in the economic development of the country. The MSME sector has the potentialities to emerge as the backbone of the Indian economy and to continue as an engine of growth, must be provided with an environment-friendly policy framework and enabling infrastructural support. MSME issues Credit flow to MSMEs As per a quarterly report by Transunion Cibil and Small Industries Development Bank of India (SIDBI), the overall credit to the MSME segment grew 16.1 percent for the year to June 2018, in which, PSBs reported a growth of 5.5 percent, compared with 23.4 percent for the private sector competitors. Data given in Chart 2 and Chart 3 reveal that the credit to MSME has shown an increasing trend during and after 2017. As per the (Mint Street Memo No 13) RBI report dated August 17, 2018, credit growth in the MSME sector had started decelerating even before demonetisation and declined further during the demonetisation phase. In contrast, GST implementation does not seem to have had any significant impact on credit. Overall, MSME credit and especially microcredit to MSMEs including loans by banks and NBFCs shows a healthy rate of growth in recent quarters. During the quarter April-June 2018, bank credit to MSMEs increased on average by 8.5 percent (y-o-y). The Reserve Bank of India (RBI) observed ‘Despite significant contribution to economic growth, MSMEs face several bottlenecks inhibiting them from achieving their full potential. A majorobstacle for the growth of MSMEs is their inability to access timely and adequate finance as most of them are in niche segments where credit appraisal is a major challenge. The challenges faced by MSMEs in accessing finance are due to lack of comprehensive formal documentation relating to accounts, income and business transactions. As a result, loans are provided to the MSMEs mainly through the appraisal of their collaterals rather than assessing their true business potentials. Further, banks do not trust start-ups, view such loans as risky and thus do not prefer extending finance to MSMEs’. (RBI CIR-Aug 18) (2) Private Banks, NBFCs outdo PSBs in lending to SMEs In a study conducted by Transunion Cibil, it is found that there has been an increase in the Turn-Around Time (TAT) for loan processing across all the three segments as mentioned in Table 3:
In order to improve the TAT for processing of MSME loan proposals, the Finance Minister on 25thwww.psbloansin59minutes.com September, 2018 while reviewing the performance of PSBs announced a common online portal for MSMEs credit space. ‘The web portal () will enable in principle approval for MSME loans up to INR 1 crore within 59 minutes, without entrepreneurs having to visit branches, from SIDBI and five Public Sector Banks (PSBs)’. From the Chart 4, 5a and 5b data, it is indicated that : • The share of Scheduled Commercial Banks (SCBs) to MSME credit has shown a declining trend; whereas the share of NBFCs has an increasing trend. (Chart-
4) • The share of PSBs has a declining trend vis-à-vis an increasing trend revealed by private sector banks. • The share of credit extended to MSMEs in overall bank credit declined steadily to around 14 percent by end-March 2018 from about 17 percent in 2007. This could be partly due to over-lending to large corporates (now stressed) in the second half of the 2000s. Additionally, within the credit to the industrial sector, the share of credit to medium enterprises has dropped significantly as compared to the share of micro and small enterprises .From from the data collected by Transunion Cibil and SIDBI, the share of 21 PSBs has fallen to 50.7 percent as of June 2018, from 55.8 percent in June 2017 and 59.4 percent in June 2016. (3) Non-Performing Assets (NPAs) From the data in chart 6, it is clear that the growth of credit by PSBs during the past three years has declined. Conversely, the NPAs has increased. The credit growth was 7 percent, and NPA increase was 13.1 percent. In the case of Private sector banks, the credit growth toMSME sector registered 14.3 percent, and NPA level is contained at a manageable level of 2.7 percent. As per the data obtained by Transunion Cibil, despite aggressive growth, private sector banks and NBFCs far better on asset quality as well. The PSBs (NPAs) from the MSME book increased to 15.2 percent (June 2018) from 14.5 percent(June 2017), while in case of private sector banks, the ratio decreased marginally to 3.9 percent in June 2018 from 4 percent in June 2017. (4) Documentation Many of the MSMEs, particularly the Micro units, do not have adequate documentation to match the rigours of a formal financial system. The absence of documentation drives the small entrepreneurs to informal sources that are willing to provide credit with minimum documentation. Further, a vast majority of the MSMEs are informal, which brings down the credit score of the entrepreneur and hinders the ability of the formal financial system to lend to them. Banks, on their part, will need to leverage modern technology algorithms and big data so that they can differentiate between a good borrower and not so good one even in the absence of conventional documentation.Documentation has now, of late, not posed a problem since most of the banks have adopted simple common loan application forms for extension of credit facilities to MSMEs up to credit limit of INR 2 crore.Further, Financial Literacy Centre (FLC) have been started by different banks which help in capacity building in existing and potential entrepreneurs.Similarly, (RSETIs) Rural Self Employment Training Institutes, is initiated as an initiative of Ministry of Rural Development (MoRD) to have dedicated infrastructure in each district of the country to impart training and skill upgradation of rural youth geared towards entrepreneurship development. RSETIs are managed by banks with active co-operation from the GoI and State Governments. MSME – Challenges: In spite of substantial contributionsmade by MSME enterprises for the development of the economy, they face following common challenges which prove obstacles in the path of their growth and development: 1. Lack of adequate capital and credit. 2. Poor and inadequate infrastructure. 3. Market access. 4. Lack of skilled human resources. 5. Inadequate access to new technology. 6. Cumbersome regulatory practices. MSME challenges – A breather Following are some of the solutions provided by GoI, RBI, Ministry of MSME, Banks and others for mitigating the challenges of MSME: 1. Capital is the lifeblood of business. Without adequate capital and credit, MSME units will either not come forward or die prematurely. (a) Now MSME units are provided with working capital facility @ 25 percent of turnover and in case of MSME units that transact digitally @ 30 percent of turnover instead of 20 percent earlier. (b) Guarantees are provided by Credit Guarantee Trust Micro and Small Enterprises (CGTMSE) for extending collateral free lending to MSMEs through Banks and financial institutions (Fis) including NBFCs.
(c) ‘Credit Linked Capital Subsidy Scheme (CLCSS)’ provides a capital subsidy on institutional finance. (d) Various credit rating agencies like Small and Medium Enterprises Rating Agencies (SMERA) has been established for a rating of MSME units which help banks in the assessment of credit facilities. Such ratings also enable MSME units to get interest concessions from various banks and Fis. (e) In terms of the recommendations of the Prime Minister’s Task Force on MSMEs, banks are advised to achieve: • 20 percent year–on–year growth in credit to micro and small enterprises; • 10 percent annual growth in the number of microenterprise and accounts; and • 60 percent of total lending to the MSE sector as on corresponding quarter of the previous year to microenterprises. (f) As per the RBI guidelines, banks are mandated not to accept collateral security in the case of loans up to INR 10 lacs extended to units in the MSE units. Further, banks may, on the basis of good track record and financial position of the MSE units, increase the limit to dispense with the collateral requirement for loans up to INR 25 lacs (with the approval of the appropriate authority). (g) A composite loan limit of INR 1 crore can be sanctioned by banks to enable the MSE entrepreneurs to avail of their working capital and term loan requirement through Single Window. The Ministry of MSMEs has vide their GazetteNotification dated May 29, 2015 had notified a ‘Framework for Revival and Rehabilitation of MSMEs’ to provide a simpler and faster mechanism to address the stress in the accounts of MSMEs and to facilitate the promotion and development of MSMEs. 2. (a) SFURTI – Scheme of Fund for Regeneration of Traditional Industries is the scheme to organise traditional industries and artisans into clusters to make them competitive and provide support for their long term sustainability. (b) Scheme for Micro and Small Enterprises Cluster Development Programme (MSE-CDP): The Ministry has adopted the cluster development approach as a key strategy for enhancing productivity and competitiveness as well as capacity building of MSEs. 3. The government has introduced a flexible growth stimulating and artisan oriented Market Development Assistance (MDA) scheme, in place of the erstwhile system of Rebate. Under MDA, financial assistance is provided to the institutions @ 20 percent of the value of production of khadi and polyvastra, to be shared among artisans, producing institutions and selling institutions in the ratio of 40:40:20. As a boost for marketing assistance, Special Marketing Assistance Scheme (SMAS) has been launched in which SC / ST entrepreneurs shall be allowed reimbursement under SMAS for a maximum of 2 international events and four domestic events in a financial year. 4. Under the Ministry of MSME, A Scheme for Promotion of Innovation, Rural and Entrepreneurship (ASPIRE) has been developed to: • Create new jobs and reduce unemployment; • Promote entrepreneurship culture in India; • Grassroots economic development; • Facilitate innovative business solution for unmet social needs; and • Promote innovation to strengthen the competitiveness of the MSME sector. National Small Industries Corporation (NSIC) is an ISO 9001-2008 certified Government Enterprise under Ministry of MSME is a premier organisation fostering the growth of MSMEs. It promotes and supports MSMEs by providing integrated support services encompassing, Marketing, Finance, Technology and other Services. National Institute for MSMEs (NIMSME) has been in existence since 1960. Enterprise promotion and entrepreneurship development being the central focus of NIMSME’s functions, the Institute’s competencies converge on the following aspects:
• Enabling enterprise creation • Capacity building for enterprise growth and sustainability • Creation, development and dissemination of enterprise knowledge • Empowering the underprivileged through enterprise creation. While inaugurating the Udyam Sangam – 2018 in New Delhi on International MSME Day 2018, the President of India Ram Nath Kovind launched Udyam Sakti portal of the MSME Ministry and said that it would empower women and weaker sections by providing training to 80 lac women. 5. The Ministry of MSMEs, GoI has launched on 18th October, 2016 a new scheme ‘Financial support to MSMEs in ZED Certification scheme’ for the benefit of MSMEs. The scheme envisages promotion of Zero Defect and Zero Effect (ZED) manufacturing amongst MSMEs for developing an ecosystem for Zero Defect manufacturing in MSMEs, promoting adaption of quality tools / systems and energy efficient manufacturing without impacting the environment. 6. (a) To enable ease of registration of MSMEs, the Ministry of MSME has notified a simple one-page registration form ’Udyog Aadhaar Memorandum’ (UAM) on 18th September, 2015. (b) To facilitate the enterprises to take benefit of various schemes by the Office of Development Commissioner (MSME), his office has launched a web-based application module, namely, MyMSME. (c) The Ministry has started an MSME internet grievance monitoring system (e-SAMADHAN) to track and monitor other grievances and suggestions received in the Ministry. MSME SAMADHAAN launched on8th December, 2017 under the MSMED Act, 2006 deals with addressing the issues relating to the Delayed Payments to MSEs by the buyers to the MSE supplier. (d) MSME-SAMBANDH: The Ministry of MSMEs MSME-SAMBANDH launched on 8th December, 2017 notified the public procurement policy for MSMEs which mandates 20 percent of annual procurement from MSEs including 4 percent from enterprises owned by SC / ST entrepreneurs by the Central Ministries / Departments of Central Public Sector Enterprises. (e) Banking Codes and Standard Board of India (BCSBI) prepared code in place in 2008 and revised in 2015 in which it sets minimum standards of banking practices for banks to follow while dealing with MSEs. (f) Banking Ombudsman Scheme: Within 30 days of lodging a complaint with the bank, if MSEs do not get a satisfactory response from a bank and MSEs wish to pursue other avenues it may approach Banking Ombudsman. Conclusion MSME sector is a platform of nursery for entrepreneurship development and a school of innovation. Countless medium and large corporates in India have evolved out of being micro and small entrepreneurs. MSME sector is crucial for the success of the national agenda of Financial Inclusion. Technology and innovation will continue to play a pivotal role in creating a businessfriendlyatmosphere for the MSMEs. This sector has exhibited enough resilience to sustain itself on the strength of our traditional skills and expertise and by infusion of new technologies, capital and innovative marketing strategies and possesses enough potential and possibilities for accelerated industrial growth in our developing economy and well poised to support various national programmes like ‘Make in India’. All stakeholders – whether banks, MSME firms or the policymakers- must make efforts in their respective domains to seize the opportunity that the MSME sector provides. For a healthy and mutually beneficial relationship between the banks and borrowers, it would be essential for both parties to understand and appreciate each other’s point of view and work proactively.
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