Resurgent India Knowledge Series Presents
Webinar on Mega MSME Outreach Programme - Bank's Initiatives towards the MSME Sector
Speakers- Shri Atul Kumar Goel, Managing Director & CEO-UCO Bank
Moderated By- Mr. Jyoti Prakash Gadia, Resurgent India Limited
The MSME sector is one of the most valuable the sector in India as it contributes greatly to the growth of Indian Economy with a network of 6.24 Cr. units industries in MSME Sector, where Micro Enterprises constitute of 99.47%. The sector has shown 11.10 Cr of employment that contributes to 50% of the total workforce of the country and also contribute around 49% of the export of the Country and 30% of the GDP. Hence, we can say that this sector is the backbone of the economy and it is the responsibility of all the stakeholders to support the growth of this sector so that the dream of building a 5 TN economy becomes successful.
Despite being the most important contributor to the country’s economy, this sector has been struggling in recent times due to competition from large industries and other countries, lack of marketing, infrastructural shortcomings, high cost of production, and most importantly, realization from the debtors, which have caused them to have 10 – 15% of NPA.
RBI addressed the growing concerns of stress in the sector and allowed the restructuring scheme of MSME up to 25 Cr. from January 2019 for SMA 0, 1, 2 without downgrading the account. RBI has also issued guidelines regarding interest rates which has made mandatory for the MSMEs to link their rates to an external benchmark to reap the direct benefit of reduction in repo rate. Along with these, RBI has also introduced multiple initiatives like PSB – 9 and interest subvention of 2% up to March 2020, with a possibility to further increase, to aid the MSME sector.
Apart from RBI, the banks are also putting effort to support the MSME sector and as well as the Chamber and Commerce Association which can help the unorganized players of the MSME to educate them about keeping systematic data.
The ongoing pandemic – COVID 19, has disrupted the growth in the country’s economy by making slow movement in business across sectors. The ax has fallen on the MSME sector also with ceased production, migrating labor, and increasing fixed cost as an identified issue during the on-going pandemic.
To curtail the stress faced by the MSME sector, RBI and the Government of India have come up with relief packages in the form of - 3 months deferment of principal and interest for Term Loan and Cash Credit, 10% emergency line of credit to the existing borrower, reassessment of working capital and reduce the margin to increase the DP and decision to interchange non-fund based to fund based limit except BG.
The Government of India has also introduced packages for the revival of the MSME sector by introducing a 20% automatic loan, subordinated debt for stressed MSMEs, and equity infusion through Funds of Funds and redefining of MSMEs which will help the sector in improving the liquidity.
The Banks have also come up to support the worst-hit MSME sector by keeping the procedural formalities of documentation simple and short. The verification of documents will happen afterward and the State Government also has waived off stamp duty penalty wherever applicable. The Banks have geared up for financing all kinds of projects with the increasing discussion of India becoming the manufacturing hub.
The Association of MSME and other Chambers should undertake to bring around the credit agencies to revise their parameters for rating MSMEs to avoid the unfavorable credit rating which will help the MSMEs to represent themselves in a better way.