New Delhi, Aug 5 (KNN)  The Rs 500 crore credit guarantee fund announced with great fanfare for encouraging the factoring services for receivables of the micro, small and medium enterprises (MSMEs) stands drastically diluted with only Rs 50 crore being provided in the Budget for 2014-15.
 
The initiative starting a factoring service by creating a corpus of Rs 500 crore with SIDBI was announced in 2012-13, pursuant to passing of Factoring Regulation Act, 2011.
 
The explanation by the Finance Ministry, under the new government, is that “Owing to General Election 2014 and enforcement of model code of conduct, the Scheme could not be got approved by the cabinet, and thus the entire provision was surrendered. During 2014-15, a provision of 50 crore has been proposed.”
 
Thus, from the proposed corpus of Rs 500 crore to a provision of mere Rs 50 crore for the current fiscal is quite a let down for the MSMEs. Payment delays are one of the main reasons for the MSMEs running out of cash and facing working capital problems. 
 
The factoring services are a possible answer, enabling the smaller firms to get their receivables encashed by paying a small premium to the factoring service operator.
 
The Rs 50 crore proposed corpus with SIDBI may not be of great help and the service may not take off, it is feared among the industry associations.  (KNN/PC)