The FICCI-Confederation of MSME has hailed the new Framework by Reserve Bank of India (RBI) for revival and rehabilitation of MSMEs.
“FICCI-Confederation of MSME welcomes the announcement/notification by RBI as the formation of Special Mention Account and mandatory formation of a committee at each district for Stressed Micro, Small and Medium Enterprises by the banks would enable faster resolution of stress in an MSME account at the right time, thereby reducing NPAs in MSMEs,” Sanjay Bhatia, president, FICCI-CMSME and Managing Director, Hindustan Tins Works Ltd said in a press release.
In May 2015, the Ministry of Micro, Small and Medium Enterprises had notified a ‘Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises. RBI recently announced the new framework for Revival and Rehabilitation applicable to MSMEs having loan limits up to Rs.25 crore, including accounts under consortium or multiple banking arrangement (MBA).
The framework as proposed by the MSME Ministry and in line with RBI guidelines will operationalize by all the banks not later than June 30, 2016.
MSMEs, including Khadi and Village/Rural Enterprises, play a significant role in the economic growth of the country owing to their contribution to production, exports and employment.
The MSME sector has slowly come into the limelight, thanks to increased focus from the government, government institutions, corporate bodies and banks. Furthermore, policy based changes; investments into the sector; globalisation and India’s robust economic growth have opened up several latent business opportunities for this sector.
During the past decade this sector has recorded a higher growth rate in comparison to the overall industrial average, the release said.
The FICCI-Confederation of MSME underlined the challenges that MSMEs face such as lack of easy and adequate availability of credit because mainstream banks and other financial institutions have typically view MSMEs as high-risk investments.
It said the Government has tried to addresses some of these issues with the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. The act also stipulates debt restructuring mechanism for units in MSME sector.