FISME Calls For Urgent Review Of SMA Framework For Struggling MSMEs In Post-Covid Era

New Delhi, Jun 11 (KNN) The Federation of Indian Micro and Small & Medium Enterprises (FISME), a leading body representing MSMEs, has urged the new government to immediately address the challenges faced by micro, small and medium enterprises impacted by geo-political disruptions in the post-Covid period.

In a communique submitted to the Department for Promotion of Industry and Internal Trade (DPIIT), FISME highlighted that many MSME exporters have been severely affected by events such as the Russia-Ukraine war, the Israel-Palestine conflict, and the recent crisis in the Red Sea, leading to delays or cancellations of orders and payments.

However, exporters are not the only ones struggling. Several MSME segments are grappling with delays in payments, prolonged arbitration processes with government agencies, and issues with large corporations undergoing insolvency resolution under the IBC Act, according to FISME.

The body has raised concerns about the Reserve Bank of India's Special Mention Account (SMA) provisions, which do not consider such extraordinary circumstances.

Under the SMA framework, banks are required to assign ratings of SMA-0, SMA-1, or SMA-2 to accounts showing signs of stress, even if payments are only 30 days overdue. This effectively paralyses the banking operations of the affected units.

FISME has called for urgent reforms to the SMA policy, which it claims has proved disastrous for thousands of MSMEs recovering from the Covid-19 pandemic.

The policy, in place since 2013, has led to successful MSMEs being classified as non-performing assets (NPAs) due to its rigid nature, ultimately forcing some to shut down operations.

The body cited examples of a Jaipur-based auto-lights manufacturer and a Bangalore-based granite pickling-tank manufacturer, both of which turned NPAs and were forced to close due to the SMA framework's impact during the pandemic and geo-political crises.

FISME has urged the government to review the SMA policy urgently to prevent further harm to the MSME sector, which plays a vital role in the country's economy.

(KNN Bureau)