The Reserve Bank of India (RBI) has recommended a government-sponsored fund of Rs 10,000 crore to support investments made in micro, small and medium enterprises (MSMEs).

Also read: RBI recommends Rs 10,000 crore government sponsored fund of funds for MSMEs

The central bank has recommended to set up a Fund of Funds (FoF) to support the venture capital and private equity funds investing in the MSME sector on modified term sheets developed by Small Industries Development Bank of India (Sidbi), a report published by the central bank said.

Here are the 10 key things to know about the RBI’s MSME recommendations.

Definition of MSMEs

Turnover-based definition would be transparent, progressive and easier to implement

Role of Sidbi

More focused engagement of Sidbi with state governments for MSME development, promotion

Sidbi should gradually take the role of a market-maker for SME debt on select platforms

PSB loans in 59 minutes

Limit of loans should be enhanced to Rs 5 crore from Rs 1 crore.

Funding for MSMEs

Government-sponsored Fund of Funds (FoF) of Rs 10,000 crore to support VC/PE firms investing in MSME sector.

Rs 5000 crore Distressed Asset Fund to work in tandem with RBI schemes or bank-led NPA revival solutions for MSMEs.

National Board for MSMEs

National Board may continue to function as the body for reviewing and steering the overall implementation of various policies / schemes of MSMEs.

Convergence of govt schemes

Ministry of MSME should be the nodal ministry for all interventions pertaining to the MSME sector, rather than multiple schemes being run by different ministries.

Exit policy for MSMEs

Expeditious insolvency system for MSMEs will give comfort to lenders.

Insolvency code/ delegated legislation should provide for out-of-court assistance to MSMEs.

Collateral free limit

Increase limit for non-collateralised loans to Rs 20 lakh.

Revision in loan limit sanctioned under MUDRA to Rs 20 lakh from Rs 10 lakh.

Lending to MSMEs under PSL

For banks that wish to specialise in MSME lending, the requirements to do agricultural lending under PSL can be waived provided they achieve 50 percent of NBC as SME-PSL lending.

Role of MUDRA

Reimagining of MUDRA is necessary including assessing the rationale for continuing it as a subsidiary of Sidbi.

First Published:Jun 25, 2019 3:58 PM IST