New Delhi, Feb 1 (KNN) Acknowledging that working capital credit remains a major issue for the micro, small and medium enterprises (MSMEs) in the country, Finance Minister Nirmala Sitharaman has proposed in the budget to introduce scheme to provide subordinate debt for MSMEs.

In her speech, Finance Minister said, “It is proposed to introduce a scheme to provide subordinate debt for entrepreneurs of MSMEs.”

This subordinate debt, she said to be provided by banks would count as quasi-equity and would be fully guaranteed through the Credit Guarantee Trust for Medium and Small Entrepreneurs (CGTMSE).

The corpus of the CGTMSE would accordingly be augmented by the government, she proposed.

The MSME Ministry and Small Industries Development Bank of India (SIDBI) established the CGTMSE in 2000 to implement the Credit Guarantee Fund Scheme. The corpus of CGTMSE is contributed by the GoI and SIDBI in the ratio of 4:1 respectively.

Under the scheme, collateral-free credit (fund and non-fund-based) extended by eligible financial institutions to new and existing micro and small enterprises, up to a limit of Rs 200 lakh (Rs 2 crore), are eligible to be covered by the fund trust.

The Minister also highlighted that more than five lakh MSMEs have benefitted from restructuring of debt permitted by RBI in the last year. The restructuring window was to end on March 31, 2020. Government has asked RBI to consider extending this window till March 31, 2021.

Further, an app-based invoice financing loans product will be launched. This will obviate the problem of delayed payments and consequential cash flows mismatches for the MSMEs. (KNN Bureau)