The India Aspiration Fund (IAF), set up to boost the startup ecosystem in the country should be moderated on the lines of NIIF, which funds up to 49 per cent of the capital requirement, head of Bank of Maharashtra said today.

“The MSMEs have the equity problem. But a solution has been brought by the (Finance) Ministry, that is creation of the India Aspiration Fund (IAF),” CMD of Bank of Maharashtra, Sushil Muhnot said at an industry event in New Delhi.

“The problem is that this fund gives only 15 per cent of the money, at best it can give up to 20 per cent. My suggestion to the government is that it can be moderated on the lines of National Infrastructure Investment Fund (NIIF), which funds up to 49 per cent of the money,” he said.

Like NIIF, if 49 per cent (fund) can be given under IAF, then getting the balance 51 per cent will be easy for MSMEs, he added.

“At least 49 per cent solution…will make things much better for MSMEs and will also have a very good multiplier effect on the industry”, Muhnot said.

In August last year, Finance Minister Arun Jaitley launched the IAF, to be set as a fund of funds under the Small Industries Development Bank of India (SIDBI).

It was set up to boost startup ecosystem as well as cater to loan requirements of the MSMEs.

Up to Rs 2,000 crore has been taken under IAF until now and it can go up to Rs 5,000 crore, Muhnot said.

On the problem of delayed payments being faced by these enterprises, he said the proposed Trade Receivables Discounting System (TReDS) initiative by RBI will solve it to a great extent.

“There is a problem of delayed payments from customers (of MSMEs). They are dependent on the large corporates…A solution possibly has now come with the RBI coming out with the guidelines on a platform to be created as TReDS.”

TReDS is a scheme for setting up and operating an institutional mechanism for facilitating the financing of trade receivables of MSMEs from corporate buyers through multiple financiers.

It will facilitate the discounting of both invoices as well as bills of exchange.

Muhnot also urged the Ministry of Micro Small and Medium Enterprises to track the TReDS, once the portal becomes operational.

“I would suggest that even the MSME Ministry can monitor the TReDS, once the portal comes up in the next few months. A large number of government organisation also do not make payments (on time). So, this is a solution to the problem of delayed payments,” he added.

Source: The Economic Times