Govt Contemplating New Fund to Assist MSMEs with Financial Distress: Finance Minister

Bengaluru, Jul 29 (KNN) Finance Minister Nirmala Sitharaman announced on Sunday that the union government is developing a new fund to work with banks in supporting Micro, Small, and Medium Enterprise (MSME) units facing financial distress due to delayed payments from customers.

This initiative comes in response to concerns raised by MSME units regarding Section 43B(h) of the Income Tax Act 1961, which mandates traders to clear MSME bills within 45 days of purchase or forfeit deduction benefits.

Addressing a media conference in Bengaluru, Sitharaman emphasised the government's commitment to supporting the MSME sector. She stated that banks will continue to provide working capital support to MSMEs and assist them in overcoming distress situations.

The Finance Minister highlighted that the recent Budget had recognised the sector's needs, facilitating bank loans for machinery and equipment purchases without collateral or third-party guarantees.

Acknowledging past complaints from the MSME sector about banks' lack of understanding regarding their turnover cycles and business operations, the government has directed the Small Industries Development Bank of India (SIDBI) to open new branches across major MSME clusters.

In a move to boost the space sector, the government has announced a Rs 1000 crore venture capital fund to support space sector startups and private companies in Bengaluru. This initiative is expected to spur innovation and growth in India's burgeoning space industry.

Additionally, Sitharaman noted that the recent budget has abolished the angel tax, introduced in 2012, addressing a major concern of startup founders and potentially stimulating further entrepreneurial activity.

The government's focus on research and innovation is evident in the establishment of the Anusandhan National Research Fund, with a substantial corpus of Rs 1 lakh crore.

This fund aims to support private sector-driven research and innovation, opening new avenues for India's tech-savvy youth and potentially driving technological advancements across various sectors.

Lastly, Sitharaman highlighted Bengaluru's crucial role in developing and expanding digital public infrastructure across various sectors, including agriculture. The goal is to achieve a scale similar to that of digital payments, further cementing India's position as a leader in digital innovation.

These collective measures aim to strengthen the MSME sector, foster innovation, and drive economic growth through targeted support and policy reforms.

(KNN Bureau)