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One Out Of Five MSMEs To See Stretch In Working Capital Days: Report

A fifth of the micro, small and medium enterprise (MSME) sector by significance is anticipated to notice a growth in working capital requirement this fiscal, compared with the pre-pandemic (fiscal 2020) level, said Crisil MI&A Research on Monday.

Its biannual MSME report indicated that sectors such as dyes and pigments, construction, gems and jewelry will notice a material stretch in their working capital days.

Notably, MSMEs accounting for 40 per cent of India’s exports, will encounter headwinds from the coming economic downshift in advanced countries, especially the US and Eurozone. These two geographies account for a third of India’s overall exports.

Pushan Sharma, Director- of Research, Crisil Market Intelligence and Analytics said, “In the Gujarat cluster, export-oriented MSMEs in Ahmedabad and Surat are predicted to witness their working capital days swell this fiscal compared with the pre-pandemic levels. The Ahmedabad cluster will see an expansion of 20-25 days, navigated by a rise in the working capital requirement of the dyes and pigments sector and the Surat cluster by ~35 days, moved by higher working capital requirement of the diamond exports sector.”

The Ahmedabad cluster has a major presence of MSMEs in dyes and pigments, pesticides, and pharmaceuticals. The working capital stretch here will be because of a drift in working capital days for the dyes and pigments sector for three motives: inventory pile-up following dumping by Chinese producers; the recent earthquake in Turkey; and a slowdown in the US. 

“These three account for 20 to 25 percent of the aggregate exports of dyes and pigments, pesticides and pharmaceuticals,” according to the report.

 As for Surat, 90 per cent of India’s diamond exports originate from there. Diamonds constitute more than half of India’s gems and jewelry exports and a significant decrease in demand from the US, the largest export market, is having a significant impact. 

That, in turn, is having a bearing on receivable days, leading to an increase in working capital days from 140 before the pandemic to more than 200 this fiscal, it mentioned.

In the construction-roads sector, the underachievement of budgeted capex last fiscal- to rein in fiscal deficit- has added to the challenges of developers in meeting working capital demand amid high commodity prices. This has led to an increase of more than 100 days in their working capital cycle this fiscal, compared with pre-pandemic levels.

Elizabeth Master, Associate Director- Research, Crisil Market Intelligence & Analytics, “Liquidity benefits, such as payments on the achievement of small milestones, that MSMEs in the construction-roads sector have been receiving from the central government for the past few years as a part of the Atmanirbhar package will not be available from this fiscal. That will further increase working capital days.”

The debt requirement for the MSME sector is estimated at over Rs 100 lakh crore. Of this, 70 per cent is for working capital requirements. A fourth of the debt is sourced formally. The cost of capital from the informal segment is extremely high. Thus, understanding the working capital needs across sectors and clusters is critical, the report said.

News Updated Date: 19th July 2023

 

MSME Ministry Makes Aadhaar Authentication For Informal Micro Units Voluntary To Boost Udyam Registration

The MSMEs ministry has made Aadhaar authentication for informal micro enterprises voluntary to facilitate access to priority sector lending. The MSMEs ministry has made Aadhaar authentication for informal micro enterprises voluntary to facilitate access to priority sector lending. The notice came after the federal government received the proposal for Aadhaar authentication from the MSME ministry, which stated that it was done “in the interest of good governance, Government allowed the ministry to improve access to services. Linking businesses with Aadhaar helps the government address the challenges faced by potential beneficiaries, but it is voluntary to ensure promoters are comfortable with sharing their Aadhaar details.

News Updated Date: 31st May 2023

NBFCs Lending To Small Businesses To See $15BN Deal Flow By Fy33

According to the survey, only 14% of India’s 6.4 crore MSMEs have access to loans. Overall their financial status is $1,955 billion out of which $1,544 billion is in debt. The market size is projected to be $819 million, of which only $289 million is satisfied by formal credit, considering that slightly more than half of this demand comes from viable enterprises.

According to Anshul Agarwal, MD & co-head of consumer, financial institution, and business service group at Avendus, this industry is confronted with a significant challenge of a $500 billion crediting gap and $100 billion exists for the small ticket loan segment. We think that MSMEs are the backbone of our economy and that their expansion is essential for us to reach a GDP of $10 trillion and that this market is beginning a virtuous cycle, and lenders in this market will be able to produce a 20% return on equity over the long term.

NBFCs are regarded as being more advantageous than banks due to their extensive presence and low-cost branches. Additionally, they perform better at finding clients and determining the clients’ capacity for payback.

News Updated Date: 15th May 2023

MSME Credit Demand Surges, While Default Rates Decline: CIBIL Data

The demand for credit from MSMEs in India increased by 31% YoY in January 2022, while overdue loan accounts decreased by 29%, according to CIBIL. This suggests that the Indian government’s emergency credit guarantee scheme launched in 2020 has successfully supported MSMEs during the pandemic. The scheme has been extended several times, and lower interest rates have helped businesses access credit, leading to a growth in demand for credit. Experts attribute the default drop to loan restructuring under the scheme and improved economic conditions.

The growth in credit demand is a positive sign for the Indian economy, as businesses start investing and expanding again after the pandemic-induced slowdown. However, some experts express concerns about the sustainability of this growth due to ongoing uncertainty around the pandemic and rising inflation’s potential impact on businesses.

The Indian government’s credit guarantee scheme has provided MSMEs with loans up to INR 2 crore ($270,000) at a concessional interest rate of 7.5% for up to five years, with 75% of the loan amount guaranteed by the government. This has encouraged MSMEs to borrow and invest in their businesses, leading to a surge in credit demand.

In summary, the Indian economy is gradually recovering from the pandemic-induced slowdown, with MSMEs playing a critical role in this recovery. The continued success of the credit guarantee scheme will be crucial in sustaining this growth and ensuring MSMEs can access the credit they need to thrive.

News Updated Date: 04th April 2023

Emergency Credit Line Guarantee Scheme – MSMEs Received A Loan Of 3 Lakh 61 Thousand Crore Rupees

The Emergency Credit Line Guarantee scheme was announced in 2020 as a part of the Aatmanirbhar Bharat Abhiyan to assist qualifying MSMEs and business companies in restarting their operations in the wake of the disruption of the COVID-19 pandemic. 

Under the Emergency Credit Line Guarantee Plan, loans of 3 lakh 61 thousand crore rupees have been given access to Micro, Small and Medium Enterprises, or MSME. The 1 crore 19 lakh borrowers have profited from this. Dr Bhagwat Kisanrao Karad, Minister of State for Finance, stated in a written response to a question in the Lok Sabha that this programme encompasses all economic sectors.

News Updated Date: 20th March 2023

SIDBI to offer Unsecured Loans to MSMEs via Co-lending Spaces

To offer MSMEs Unsecured Business Loans, SIDBI collaborates with Ambit Finvest Pvt. Ltd. SIDBI has never co-financed a project with a non-banking financial institution before (NBFC). The joint venture is following the Reserve Bank of India’s most recent Co-Lending framework. When NBFCs and Banks combine their strong balance sheets through co-lending, everyone benefits.

The geographical reach of banks can be increased while they still meet their lending requirements for the priority sectors. The MSMEs, which can get financing more quickly and for a lower cost, are the real winners.

News Updated Date: 4th January 2023

Crisil Estimates MSME Credit to Grow 16-18% In the Forthcoming Fiscal Year

Working effortlessly on a broad-based economic recovery and robust, sophisticated balance sheets, now the lenders can expect their credit to grow at 15% at the start of the next fiscal year. A report was published on Tuesday mentioning the credit growth of the current fiscal to be around 18% which seems quite a decadal high.

So far, the large lenders are observing corporations lining up with banks for funds. These funds are required for capital expenditure and working capital due to the demanding side of the economy getting better. Following are some crucial facts according to the reports printed:

• The agency predicts credit growth to be attracted more by retail and MSME sectors, while corporate credit might see the larger contributor next fiscal.
• The MSME segment is estimated to get a reasonable hike rate of 16-18% over this fiscal and 2023 as well.
• While agriculture credit growth might hover around 10%, backed by fairly normal monsoons and harvest.
• In Q2, SBI had the best corporate loan sales in terms of 20% growth, and most other lenders are private sector banks.
• Bank credit is estimated to experience a growth of 15% per annum in the coming fiscal.
• The agency clarified that Crisil’s forecast is viable on an awaiting 7% GDP growth seen in this fiscal.
• They expect continual credit push from the infrastructure of government disbursement; greater working capital entails a high-inflation environment and few enhancements of debt capital market borrowings.
• After a substantial equity infusion, state-run banks might see higher growth.
• The state banks’ credit growth is reported at 12% over the 2021 fiscal year, which is still more scarce than the 17% expected for private banks.

A senior director at the agency, Krishnan Sitaraman, states that corporate credit having 45% of overall credit can fluctuate at a 2-year compounded annual growth rate of around 10-12% until March 2024.

Retail credit, consisting of 26% of the total advances, is estimated to rise the fastest at 17-19%, powered by home loans as the largest sub-segment rather than the increasing interest rates and real estate prices.

News Updated Date: 24th November 2022

Union Cabinet has increased the scheme outlay of ECLGS to Rs.5 lakh Crore

The Emergency Credit Line Guarantee Scheme was launched in the pandemic situation to help the small enterprises struggling with the decreased economy. The main objective of this scheme is to provide 100 percent guarantee coverage to Banks and NBFCs and it will help them to extend the emergency credit facilities to MSMEs and Business Enterprises. This scheme has been later expanded to incorporate more sectors. 

Due to disruptions in hospitality, the outlay of ECLGS schemes has increased. The outlay of the scheme has been raised to Rs. 5 lakh crores from 4.5 lakh crore.

The additional amount of Rs.50,000 crore is especially for hospitality and related sectors. This amount will be helpful for the Business enterprises to meet their operational liabilities. 

The add-on Rs. 50,000 crores will provide reassurance for the lending institutions to give an additional amount at a low cost. The validity of the ECLGS Scheme along with the additional amount is extended up to March 31, 2023.

News Updated Date: 24th August 2022

MSMEs To Now Get CIBIL Score From SIDBI

In a bid to boost the credit culture among MSMEs, the Small Industrial Development Bank of India (SIDBI) is planning to give a CIBIL score to all MSMEs registered with it. This would help in better credit payback, and ultimately improve their business operations.As per the Central Bank of India, it will be mandatory to have CIBIL Score for MSMEs from January onwards. And this is a big step towards bringing transparency and accountability in the Indian system. All MSMEs are required to register themselves with CIBIL and get Score by next year.

The scheme of making MSMEs open to micro crunch funding and providing a CIBIL score for them to avail funds from the SIDBI is now on. This move is expected to benefit around 80 lakh MSMEs

News Updated Date: 09th August 2022

New Apparel Park to Open Up in Lucknow’s Malihabad

In Lucknow’s Malihabad area, a new project will be taking place. It is called an apparel park that would assist in employment of about five lakh people, as per UP government;s MSME minister Rakesh Sachan. The plan has been given the seal of approval by Yogi Adityanath government. It has been reported that it will be one of the biggest projects yet with about 1000 acres of the area reserved for it. 

Moreover, it will come under the jurisdiction of the PM Mitra scheme and an allowance of ₹1000 crore will be given to it. The state capital will now have the opportunity to offer employment opportunities to the people.

News Updated Date: 26th July 2022

Growth in MSME loans for FY22 surpasses pre-Covid levels by 36%

The loan portfolio outstanding of micro, small and medium enterprises (MSMEs) rose to Rs 22.7 lakh crore in March 2022. There were 137.4 lakh active loans for the MSME sector, an increase of 7 per cent from March 2021.

Following are the trends before after pre-covid of MSME loans:

1. Increase of 36 percent in March 2020
2. 18 percent over March 2021
3. For 181-360 days, PAR held steady at 0.3%
4. PAR for 360 days past due improved from 2.5 percent in March 2021 to 2.2% by March 2022

Between FY20 and FY22, the market share of private banks increased from 33.6% to 69.8%. NBFCs and public banks saw their market share decline. PSU banks’ average ticket size in FY22 was 28.6 lakh, while foreign banks’ was 502.6 lakh.

News Updated Date: 1st July 20202

SIDBI’s Loan Scheme for MSMEs Covers 93% Loan Disbursals till November, 2021

In November 2018, Prime Minister Narendra Modi launched a 59-minute in-principle loan approval scheme for Micro, Small and Medium Enterprises (MSMEs). Up till November 2021, 93% of the total loan applications have been sanctioned loans which comes up to 2,35,522 loans involving Rs.78,738 crore. 

Loans equating to Rs.64,326 crore have been disbursed to 2,19,526 borrowers, which amounts to 81% of total loan disbursal. The period between October and March witnesses the highest amount of loan sanctions. This is pertaining to yearly festivities and the fact that MSMEs require more funding during this time. After March, banking audits are frequent; therefore, the lending rate declines. 

The MSME loan approval scheme is provided in 59 minutes provided there is due diligence performed by the lender of the borrower’s choice. The in-principle loan disbursement takes about 7 to 8 working days. SBI, Bank of Baroda, ICICI Bank, Kotak Mahindra Bank, Punjab National Bank are some of the banks that have presently partnered with the scheme.

Assam and SIDBI strengthen ties to boost MSMEs

SIDBI or Small Industries Development Bank of India has recently participated in an event that took place at Administrative Staff College in Guwahati in the state of Assam for strengthening the cooperation of the state. It was chaired by the CM of Assam Mr. Himanta Biswa Sarma. In the function, Dwivedi who is the Principal Secretary of Industries & Commerce has expectations on the themes such as cluster development, startups, livelihood and the promotion of enterprise. This project would be offering some assistance in loans that would be given under SCDF which extends to the Assam government. It is hoped that the MSME cluster could be upgraded using the facilities available for infrastructure.

Tamil Nadu Government to Get Loan from SIDBI to Upgrade Its MSME Cluster

Tamil Nadu has become the first state to receive approval for the funds that were announced by SIDBI recently. The Tamil Nadu Government plans to invest those funds to upgrade the MSME cluster that already exists and develop industrial infrastructural facilities that currently don’t exist. The Tamil Nadu Government is the first government to receive approval. A lot relies on how efficiently they are utilized as it would affect future lending.

Neither SIDBI nor the Tamil Nadu Government has mentioned the number of funds that have been approved and the tenure of the loan. Sivasubramanian Ramann, the IA&AS of SIDBI, has assured that all the assistance will be given to the MSME cluster of Tamil Nadu so that they can emerge sustainably vibrant and on the top of the value chain. Sivasubramanian Ramann is also the Chairman and MD of SIDBI. He added that the funds would also support issues like:

1. Technology
2. Skilling/Upskilling
3. Energy Efficiency
4. Market
5. Credit
   
   

Since May 2020, Rs 77,000 Crore MSME Dues Cleared

Ever since the launch of the MSME portal, about 1.14 lakhs of applications have been received from micro and small enterprises. Now, so far since May 2020 and during the Covid, about Rs, 77,000 crore worth of MSME dues have been cleared. The data was shared by the MSME Minister Narayan Rane via Twitter. This comes in right after the Modi government completes 8 years in the office on May 30th. The information showcases the initiatives taken by the government. The said cleared dues are believed to be on-time payments to MSMEs, due to the fact that the minister refrained to mention the delayed payments made to MSMEs. 

Reportedly, at the Calcutta Chamber of Commerce in the May 2020 video conference, the former MSME Minister Nitin Gadkari mentioned about 5 lakh crores were owed to MSMEs and not cleared.

Updated Date: 22nd June 20202

15% growth to be seen in FY22 for the MSME sector, while NPA’s to continue at around 12%

The overall annual MSME NPA (Non-Performing Assets) increased from 8.6% in FY19 to 12.6% in FY21. As per prior calculations and reports, it is likely to remain around the same level this financial year as well. With the steady reopening of business as COVID-19 restrictions are lifted, revenue growth is inevitable. The overdue demand has shifted ever since the start of this year, and also, the increase in prices due to inflation will impact the statistics. There is a rapid growth of loan prerequisites in banks at 8-10 percent compared to the 5-7 percent for NFBCs this year. The schemes like Emergency Credit Line Guarantee Scheme (ECLGS) and disbursements are said to expose the sector to more developments. Given that the third Covid wave hasn’t dampened the market.

News Updated Date: 27-05-2022

SIDBI’s 59-min loan scheme- a boon for fintech start-ups & micro-units

Online PSB Loans have announced that new fintech start-ups will get funds from SIDBI’s 59-minute in-principle loan approval scheme for MSMEs. 

Jinand Shah, Co-founder, and CEO of Online PSB Loans said that the strategic partnership would make lending easier. He added that earlier, getting funds for a start-up would take a lot of time. But with the new partnership, the start-up would just have to convince them to access funds. Banks will also leverage the portal to connect with these start-ups. 

Co-owned by SIDBI and other public sector banks, Online PSB Loans is willing to invest in young start-ups. Rs 50 crore investment from HDFC Holdings and Trans Union will also focus on creating awareness via marketing. 

With more than 21 partner banks, the portal has sanctioned 2,35,511 loans involving Rs 78,738 crore as of November 1, 2021, official data from the MSME Ministry. 

Renu Sud Karnad, Managing Director, HDFC Ltd on investment in Online PSB Loans, said that digitization would improve the customer experience while saving cost and time. 

This scheme, launched by Prime Minister Narendra Modi, will also explore micro-lending. Street vendors can get loans between Rs 1,000 and Rs 10,000. This partnership will improve credit disbursements for small businesses.

News Updated Date: 17-05-2022

The Number of Guaranteed Loans for MSMEs in FY22 Under ECLGS Dropped Significantly

Data from the National Credit Guarantee Trustee Company shows a sharp decrease in the number of guarantees issued to MSMEs under the Emergency Credit Line Guarantee Scheme. As of the end of February FY22, the drop is 76% under the said scheme. During the ongoing budget discussion, the Minister of State for Finance Bhagwat Karad shared that in May FY21, the number of loans guaranteed was 90.39 lakhs worth Rs 1.56 Lakh crore, while in FY22, the number recorded was 21.60 lakh worth Rs 54604 crore.

Most of the loans were guaranteed to the micro-enterprises. Ashok Saigal, Co-Chairman of the CII National MSME Council, stated that the data represents a rapid recovery among MSMEs. He also added that in FY22, 3.0 and 4.0 versions of the scheme automatically saw a drop that was launched to support the healthcare and hospitality sector.

News Updated Date: 05-04-2022

Rs. 500 Crores to Increase the Productivity of MSMEs in Pharmaceutical Departments

On Friday, the Department of Pharmacy, ministers of chemicals and fertilizers, has assigned Rs.500 crores for funding of the pharma bunches and MSMEs in this sector. In an attempt to cultivate their productivity and strengthen the industry’s infrastructure facilities, financial schemes are put in place by the ministry. Also, to make India one of the primary contributors in the pharmacy sector. This money is also put into the assistance of forming common services. With more upgrades in the production line of SMEs and MSMEs, the ministry hopes to meet the national and international regulatory standards required. This includes interest subvention and capital subsidy for loans to help in the growth. The ministry wants to focus on the rising demand, which brings to the point of increasing the division’s volume and quality of the products.

News Updated Date: 24-03-2022

Rs. 200 Crore MSME Technology Centre Revealed at Sindhudurg

In an attempt to boost the sales and popularity of small businesses, union MSME minister Narayan Rane reported the arrangement of Rs. 200 crores worth of MSME Technology centers at Sindhudurg, Maharashtra, on Friday. The two inaugural sessions focussed on how the ministry is helping in making an achievable benchmark to conquer in terms of exports, quality of products, and more by giving the best set-up. He also inducted the Konbac Sfurti Cluster, which helps small business artisans mainly deal with pottery, bee boxes, khadi, and agarbatti machines. Rupay card was also launched to help people with digital payments during the COVID-19 crisis. These recent developments have empowered small businesses lower economic classes to take up self-employment jobs. The importance of the various schemes like Udyam Registration for the MSME sector, this new initiative is said to boost sales.

Updated Date: 14-03-2022

RBI defers Non-Performing Assets till September 30, 2022; relief to NBFCs & MSMEs

In significant to the relief to the NBFCs, RBI has deferred implementation of the circular on the Non-Performing Assets (NPAs) until September 30, 2022. The relief came in after the central bank was briefed about the non-banking finance sector’s difficulties. The pandemic-induced lockdown has severely weakened the MSME sector in India. The banking regulator’s relief is expected to help MSMEs in India by not tagging the extended loans as NPAs, allowing businesses to seek further loans. 

When asked about his views on the decision, Raman Aggarwal, Director of Finance Industry Development Council (FIDC), asked about his thoughts on the decision, the RBI circular of classifying NPAs on a day-end basis would expose small borrowers to the risk of getting tagged as NPA. Also, the clause made small borrowers and MSMEs unable to earn money. He further added that FIDC induced the banking regulator to make separate clauses for banks and NBFC. Moreover, FIDC has proposed that RBI exempt the loan under Rs 2 crore.

Updated Date: 02-03-2022

Union Budget 2022: A Programme Worth Rs 6,000 Crore to Rate MSMEs

The Union Budget 2022 launched a program worth Rs 6,000 crore to rate the ministry of Micro, Small and Medium Enterprises. The Rs 6,000 crore program for MSMEs will be rolled out in the coming five years, the Finance Minister said on Tuesday. The government is launching the program to improve competitiveness and productivity while providing access to formal sources of finance. The program is expected to help the government to revitalize the MSMEs that are heavily affected by the COVID crisis.

Post-COVID recovery for the MSME sector has been tough due to low-income flow. The program launched in Union Budget 2022 supports the increased flow of finance to the MSME sector. 

FM in her presentation of the Union Budget for 2022-23 announced a Desh Stack e-portal to facilitate digital infrastructure. The government will also promote startups for Drone Shakti.

Updated Date: 25-02-2022

MSME is to be promoted jointly by BSE and all India MSME Association

On Tuesday, BSE, along with the All-India MSME Association, announced to promote and encourage leading MSMEs and start-ups. BSE and AIMA MSME will jointly evaluate the SME platforms along with encouraging the investors in MSME. 

Ajay Thakur, Head BSE MSME, and start-ups commented that SMEs and MSMEs are important for the country, and investing in them is vital. By making people aware, they can be encouraged to invest in the listed entities. Therefore, both institutes will host countrywide roadshows and events to bring awareness. 

Avinash Dalal, AIMA MSME Director, expressed his hope that this pact will achieve growth, development and the MSME sector will eventually witness the progress. 

BSE launched its SME platform in 2012 after taking approval from SEBI. 353 companies had been listed on BSE’s SME platform, out of which 122 migrated to the main board of the BSE. It remains the decision-maker of the whole segment with 61% shares to its name.

Updated Date: 08-12-2021

MSMEs – the foundation of sustainability agenda

Major economies globally, including India, have taken consistent actions in the energy transition to keep the temperature rise below 2 degrees. However, recent climate change has shown the need to implement sustainability goals. 

MSMEs- a critical part of the Sustainable Economic Development Plan

MSMEs contribute approximately 30% to the GDP of India. MSMEs face a lot of challenges, and with the pandemic, their problems have only increased. With financing and regulatory burdens, their focus on a low-carbon economy is low. Hence, the 63 million MSMEs, which employ 60 million people, need significant support to implement energy efficiency norms.

How is the government helping the MSME sector to attain sustainability?

Although the tax cut and credit support initiatives introduced in the Union Budget were a big step, there are a few more schemes that the government has initiated for the MSME sector:

1. Various schemes and packages offered under the government’s program ‘Atmanirbhar Bharat’ safeguard MSMEs from economic hardships.
2. To enable the growth of MSMEs, Green industrial clusters and parks are set up. It will ensure smooth operation and provide infrastructure.
3. The addition of segments with an efficient implementation plan for sustainability-related efforts is required. 

To promote sustainable growth, MSMEs should be encouraged to measure and minimize emissions. These value chains would have to be incentivised by their suppliers to reduce their carbon footprint. For India to adopt the net-zero goals, the MSME sector’s inclusion is necessary.

Updated Date: 18-11-2021

MSMEs herald the arrival of Golden period with the introduction of MSMEs

Financial Innovation in the private sector is rapidly increasing with the enhancement in digital public infrastructure. Digital payments have achieved critical mass with the recent tally of digital payments crossing 4 Lakh crore per month. FinTech when introduced with MSME ecosystems will have rolling ball momentum in exports, employments and the rural economy will be boosted. The citadel of digitization and electronic payments has solved the dual problems of delay in payments and credit inaccessibility.

Cash flow cycle of MSMEs can be optimally maintained by conducting linkages among micro industry and institutional sources. Union Minister Nitin Gadkari also acknowledged the presence of COVID recession in the financial health of MSMEs. Appropriate safeguards are being incorporated into the FinTech apps to remove any bottlenecks in the dispute resolution process. Credit rating systems are integrated into the fintech apps so as to increase the incentives to buyers through invoice financing and TReDS platforms from NBFCs and Banks.

Updated Date: 28-09-2021

 

Promoting MSME in Kerala

While inaugurating the MSME Workshop series that is organized by the Kerala Management Association, Mr. Mohammed Hanish, the principal secretary of industries, said that the main feature of this sector is that all entrepreneurs or MSMEs have the strength and freedom to sell their products themselves.

He added that the total number of MSMEs in Kerala have just doubled than what it was five years back. The state govt. is further strengthening this sector through disbursing loans under Mudra and Atma Nirbhar Bharat loan schemes. This has contributed greatly towards attracting youth towards entrepreneurship. Automatic licenses are being issued by Kerala Govt. to promote the ease of doing business. He further added the process for initiating MSME ventures will be made more simple in the coming few months.

G S Prakash who is the Joint Director of MSME Development Institute, told that if anyone wishes to initiate an MSME project, then one can register free online through Udyam registration.

Updated Date: 17-08-2021

 

Emergency Credit Line Guarantee Scheme gets extension till March 2023

The government extended the ECLGS in the Union budget until March 2023 on Tuesday. Furthermore, the guarantee scheme was also extended from Fifty thousand crore to Five lakh crore under the scheme. According to SBI’s group chief economic adviser, Soumya Kanti Ghosh, the expansion of ECLGS will make it easier to lend to MSME firms. The government has also rebuilt the CGTSME to extend credit. In addition, the Emergency Credit Line Guarantee Scheme was introduced in May 2020, during the pandemic, to help the MSME sector. 

Banks and NBFCs will get a 100% guarantee on emergency credit extended to MSMEs. Sitharaman also informed that the Rs 6 thousand-crore program would advance the MSME sector over the next five years. The government will also launch the Desh Stack portal to increase digital infrastructure in addition to the scheme. Moreover, startups are supposed to be promoted through the drone shake program in the Union Budget 2022-23.

Updated Date: 14-02-2022

 

Gurugram MSMEs to Compulsorily Register on State and Central Portals to Avail Exemption from COVID-19 Restrictions

In the wake of the pandemic, if MSMEs want to be exempted from future restrictions that the government can implement, then MSMEs in the district of Gurugram, Haryana, have to be registered in both states and Central Government’s MSME portals.

Currently, in the Gurugram district, there are 34855 units registered with MSME portals. According to officials, all these registered MSMEs don’t face restrictions imposed by the government due to the covid-19 pandemic.

Also, the government has set up a helpdesk at the MSME center at ITC in sector 16 to help and inform about the registration of new and existing firms.

Out of the registered portals, 30,000 are registered in the Central Government portal named Udyam registration, and the remaining are registered in Haryana Udyam Portal.

The two portals to get registered are udayamregistration.gov.in and harudayam.edisha.gov.in.

Updated Date: 07-02-2022

 

Government’s ECLGS proving to be a benefactor for MSMEs

Emergency Credit Line Guarantee Scheme (ECLGS) saves up to 14% of MSME credit. The scheme is a part of the Rs 20-lakh crores Aatmanirbhar- Bharat- Abhiyaan which was announced in May 2020.

Due to pandemic-induced lockdown, the MSME sector has suffered the most. Under ECLGS, of the borrower’s total outstanding credit, 25% is given to MSMEs. Also, the government has guaranteed up to Rs 25 crore to the MSME sector. 

The report estimates that the scheme has saved almost 13.5 lakh MSME accounts. Of these accounts, micro borrowers estimated around 48%, whereas 46% belonged to small and 6% belonged to medium category. 

The report also indicates that the scheme has saved the livelihood of 6 crore families by preventing 1.5 crore workers from becoming unemployed. The sector that got most of the benefits includes the trading sector, food processing, textiles and commercial real estate. 

Apart from Gujarat, the scheme has benefitted Maharashtra, Tamil Nadu, UP. ECLGS has prevented up to 75% of MSME credit from slipping into NPA.  

The report also suggested that there is a need to restructure the old Credit Guarantee Fund Trust to boost MSMEs credit.

Updated Date: 26-01-2022

The government may extend the MSME credit scheme to make up for the dent caused by the pandemic

The Emergency Credit Line Guarantee Scheme (ECLGS), which was supposed to end on 31st March 2022, may get an extension for another year. 

ECLGS was launched as a part of the Atmanirbhar Bharat Abhiyan. The scheme has provided liquidity support to over 10 million enterprises. The MSME credit facility has protected about 54.5 million jobs. 

The fourth stimulus package announced by finance minister Nirmala Sitharaman is worth ₹6.29 lakh crore. Originally the package was worth ₹3 lakh crore, then raised to ₹4.5 lakh crore. 

Under ECLGS, about ₹2.82 lakh crore worth of loans have been sanctioned to about 11.5 million borrowers. Disbursed loans worth ₹2.28 lakh crore have benefited 9.52 million units.

PHD Chamber of Commerce and Industry (PHDCCI) president Pradeep Multani called ECLGS the “saviour of a large number of enterprises.” He also insisted on the need to extend the scheme for more benefits. 

The founder and CEO of fintech startup Buildd Sachin Gaikwad said the ancillary units and vendors should also benefit from the scheme. He also supported the extension to support the victims of the supply chain disruptions.

Updated Date: 05-01-2022

 

No plan to implement a rating system for MSMEs: Narayan Rane

Union Minister for MSME Narayan Rane has reiterated that the government doesn’t plan to implement a rating system for MSMEs. 

The announcement of launching a ‘Digital data-based credit ratings’ for the sector was made by the former MSME Minister Nitin Gadkari. The launch was supposed to enable MSMEs to get bank loans based on the ratings. 

The government was expected to buy 15 percent of the amount raised by MSMEs with AAA ratings as equity stakes. The move was aimed at encouraging MSMEs to raise money from public markets.

Gadkari, while addressing a webinar by the Chamber of Indian MSME (CIMSME) had reiterated the need for the credit rating system. He claimed that MSMEs could get decent investment from abroad with an effective rating system.

Earlier this year, the minister had called for the rating system. Further, Gadkari also suggested setting up a dashboard for monitoring schemes to prevent delays in decision-making.

The erstwhile Performance & Credit Rating Scheme of the MSME Ministry was intended to provide a third-party opinion on MSMEs’ capabilities and creditworthiness. 

However, the scheme was discontinued.

Updated Date: 21-12-2021

 

Loans to MSMEs in Uttar Pradesh have been increased 2.5 times

According to UP Chief Secretary RK Tewari, loans given to MSME units in the state have increased 2.5 times in the last 4.5 years. Tewari said at the launch of the UP Pavilion at ‘India International Trade Fair-2021’, Pragati Maidan in New Delhi that loan disbursements to MSME increased from Rs 28,136.00 crore in 2016-17 to Rs 73,765.00 crore in 2020-21.
According to him, UP leads the country in the establishment of MSME units. The state has over 90 lakh registered units, accounting for 14.2 percent of all registered units in the country. He stated that the UP government had established an investment-friendly atmosphere by providing time-bound approvals/licenses to investors. Under the MSME Act-2020, investors have been kept free from inspection of any department for 1,000 days by granting an acknowledgment certificate within 72 hours.

Updated Date: 08-12-2021

 

Vulnerable MSMEs and the Indian economy

Over the past few decades, the growth rate of the Indian economy is being determined by the rate of development of MSMEs. The contribution of 6.3 crore MSMEs is approximately 29% towards the country’s GDP by its national and international trade. However, the pandemic has drastically changed everything.

 

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

1. The absence of proper transaction details makes it difficult for MSMEs to access loans.
2. The high cost of transactions affects a company’s profit margin.
3. Absence of high credit score and collaterals. A high-interest rate also creates problems for MSMEs to access loans.
4. Vulnerability towards cybercrimes due to lack of knowledge about handling transaction data.

Factors to strengthen MSMEs

1. Better credit facility 
2. Better marketing support 
3. Adoption of technology 
4. 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:

1. Registration
2. Availing credit guarantee
3. Raw materials
4. Tax-related problems
5. Legal formalities
6. 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