FM takes care of many concerns of MSMEs

The budget has tried to address some of the major concerns of the micro small and medium sized companies. Enhancing financing opportunities, promoting exports and easing regulatory hurdles are some of the budget proposals for the sector.

The budget has proposed to make necessary amendments to the Factor Regulation Act 2011 to enable NBFCs to extend invoice financing to the MSMEs through TReDS. “Working capital credit remains a major issue for the MSMEs. It is proposed to introduce a scheme to provide subordinate debt for entrepreneurs of MSMEs. This subordinate debt to be provided by banks would count as quasi-equity and would be fully guaranteed through the Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE).

The corpus of the CGTMSE would accordingly be augmented by the government,’ said the finance minister.

“The lack of timely finance and working capital has always been the topmost concern for MSMEs, be it for local or global trade. The provision to enable NBFCs to extend invoice financing to MSMEs will open up an additional financing channel for MSMEs, helping in economic and financial sustainability of the MSME sector. Getting timely access to capital would even allow more MSMEs to explore global opportunities as well as increase the volume of the trade,’ said Pawan Gupta, founder of Connect2India. According to the minister, more than five lakh MSMEs have benefitted from restructuring of debt permitted by RBI in the last year. The government has asked RBI to extend restructuring window by one year to March 31, 2021.

Further, an app-based invoice financing loans product will be launched. This will obviate the problem of delayed payments and consequential cash flows mismatches for the MSMEs. Further, a National Logistics Policy is being proposed to create a single window e-logistics market and focus on generation of employment, skills and making MSMEs competitive.

Promoting exports by mid-sized companies, selected sectors such as pharmaceuticals and auto components will receive handholding support for technology upgradations, R&D, business strategy etc. A scheme of Rs 1,000 crore will be anchored by Exim Bank together with Sidbi. Both these institutions would contribute Rs 50 crore each and debt funding of Rs 900 crore from banks would be made available.

Currently, businesses having a turnover of more than Rs 1 crore have to get their books of accounts audited by an accountant. This has nopw been raised by five times to Rs 5 crore, if businesses carry out less than 5 per cent business transactions in cash.