5000 crore Stressed Asset Fund for MSMEs, No Action Since 6 Months of Announcement

Six months since the announcement of 5000 crore stressed asset fund for MSMEs and the government is still working on the proposal. With drying credit in MSME’s, the government is making new schemes to prevent MSMEs from becoming non performing assets.

Stressed Asset Fund for MSMEs

Citing the MSME’s financial problem, RBI expert committee headed by former SEBI chairman, U.K Sinha recommended the formation of Rs 5000 crore distressed asset fund that will assist in the revival of sick MSME’s due to external factors. The committee suggested establishing a non-profit Special Purpose Entity to support crowdfunding. It also advised the bank to double without collateral loan limit to MSME’s, extending it up to 20 lakh. Besides, it emphasized the role of SIDBI as a facilitator in generating funds through venture capitalists. The share of MSME’s in total bank credit has declined to 13.6% in March 2019 from 17.4% in March 2010. The U.K Sinha report also confirmed that 41% of MSME’s loans fall under the stressed category, driving NPAs in MSMEs.

Work in Progress Stressed Asset Fund for MSMEs

The committee announced these actions six months ago. Arun Kumar Panda (Secretary of the Ministry of MSMEs) said that they are working on creation of stressed asset fund. He mentioned the government’s sponsored fund of fund’s scheme of Rs 10,000 crore to lure funds from private equity investors. Also, bringing up the government’s actions, he said that it is working towards setting up of Global Intelligence system as a single platform for all MSMEs export related information. Talking about the technological aspect he said that MSMEs need proper guidance to fully avail the benefits of digitalization.

Concerning stressed asset fund for MSMEs, RBI governor, Shaktikant Das stated that the resolution of the Stressed Asset Fund must be carried in an organized manner. He further added that monetary transmission is picking up pace.  Besides, he emphasized the need to find out ways to direct funds to productive MSME’s to revive the economy.

In conclusion, MSMEs are the engine for the growth of the Indian economy. The country requires more detailed policies to eliminate problems like credit crunch, unskilled manpower and lack of technology.

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