New Delhi, June 25 (KNN) The ‘Expert Committee on Micro, Small and Medium Enterprises’ set up by Reserve Bank of India (RBI) has made wide ranging recommendations  on policy and on banking and finance. The top recommendations include- a KNN exclusive:

MSME Policy

   --- A National Council for MSMEs to be set-up under the Chairmanship of the Prime Minister with the Ministers for MSME, Commerce & Industry, Textiles, Food Processing, Agriculture, Rural Development, Railways and Surface Transport being members. Similar State Councils for MSMEs in States for better co-ordination of developmental initiatives.

   --- A comprehensive new MSME Code (set of legislation) to put an end to ‘territorial jurisdiction based and arbitrary inspection system’ to address the major challenges, relating to physical infrastructural bottlenecks, absence of formalisation, technology adoption, capacity building, backward and forward linkages, lack of access to credit, risk capital, perennial problem of delayed payments, etc.

   --- Turnover based MSME definition, proposed by the Government in place of existing investment based definition, endorsed. Also recommends delegation of powers to amend definition to be given to Ministry of MSME.

   --- Instead of multiple registrations, PAN to be a Unique Enterprise Identifier (UEI)

   --- Larger states asked to establish more than one Facilitation Councils. Medium enterprises to be covered under gambit of FCs.

   --- All MSMEs to mandatorily upload all their invoices above an amount to be specified by Government on Information Utilities (IU) set up under IBC.

   --- District Industries Centres (DICs) in new avatar proposed to establish Enterprise Development Centres (EDCs) to assist rural enterprises in respect of GST, IT, UAM registration, PAN application, loan document preparation, etc.

   --- Recommends Rules under Insolvency and Bankruptcy Code for a differentiated regime for insolvency / bankruptcy of firms.  Considering their vulnerability and size, Insolvency Code / delegated legislation to provide for out-of-court assistance to MSMEs, who are predominantly proprietorships, such as mediation, debt counselling, financial education, etc.

   --- GeM and TReDS platforms to be integrated for enabling discounting of bills for orders accepted through GeM. PSEs required to settle invoices for goods supplied within 10 days of issue of certificate of acceptance.

Access to Finance

   --- A Government sponsored Fund of Funds (FoF) of Rs 10,000 crore to support VC/PE firms investing in the MSME sector that will support crowd funding from venture capital and private equity firms.  

   --- Distressed Asset Fund, with a corpus of Rs 5000 crore, to assist units hit by change in the external environment to be run on lines of Textile Upgradation Fund Scheme (TUFS)

   --- Limit of collateral security free loans raised from Rs 10 lakh to  Rs 20 lakh (including loans sanctioned under PMMY and to SHG based enterprises.)

   --- A scheme to be announced within an year to facilitate portability of MSME loans

   --- The PSBLoansIn59Minutes portal to also cater to new entrepreneurs with enhanced limit up to Rs. 5 crore.

   --- New concept of adjusted Priority Sector Lending to enable banks to specialize in lending to a specific sector.

   --- CGTMSE suggested to introduce ex-ante Credit Guarantees for loans above Rs 2 crore. After having secured guarantee, borrowers can approach different banks for better deal.

   --- Proposed a second TReDS window for reverse factoring so that supplier financing can be provided easily.

   --- A working group SIDBI and IBA to bring in uniformity and simplification of various loan application formats and assessment process and also suggest ways to reduce Turn Around Time (TAT) especially in the pre LOS (Loan Origination System) or centralised sanction stage.

   --- Basel II rating requirement (SEM exposure) raised to Rs 7.5 Crore.