RBI Proposes Rs. 5000 Crore Stressed Assets Fund For MSMEs

Reserve Bank of India (RBI) released a report on ‘Expert Committee on Micro, Small and Medium Enterprises (MSMEs)’ on June 25, 2019.  The committee panel which included Nitin Gadkari, Minister of MSME; Arun Jaitley, former Finance Minister; N K Singh, Chairman of the Fifteenth Finance Commission amongst others along with Shaktikanta Das, Governor, Reserve Bank of India, came together for the discussion held with various Industry Associations and MSME entrepreneurs. For an entrepreneur, capacity building is a crucial pre-requisite for development of the MSME’s sector as it prepares entrepreneurs with the relevant knowledge and wherewithal to function. “It has been proposed to establish Enterprise Development Centres (EDCs) within District Industries Centres (DICs) in each district. 

These institutions should be strengthened to be able to run professionally and facilitate development of entrepreneurs into full-fledged, self-sustaining enterprises. Support extended to these entities by national and state level SPVs for knowledge creation and dissemination will be crucial for their success,” said the committee report. The panel members observed that if provided with right necessary support in terms of technical know-how, managerial skill and filling up of the knowledge gap, this would lead to a multiplier effect. Further the members emphasised, they entrepreneur should be well-equipped to assist rural enterprises in respect of GST, IT, UAM registration, PAN application and loan document preparation.

The Committee recommended for the creation of a Distressed Asset Fund, with a corpus of Rs 5,000 crore, structured to assist units in clusters where a change in the external environment, e.g. a ban on plastics or ‘dumping’ has led to many MSMEs becoming NPA. “This fund could then operate on the lines of the Textile Upgradation Fund Scheme (TUFS) which has been in existence over many years. This would be of significant size in order to make equity investments that help unlock debt or help revive sick units,” said the Committee panel. Further the committee recommended a government should sponsored Fund of Funds (FoF) of Rs 10,000 crore to support Venture capital (VC) or Private Equity (PE) firms investing in the MSME sector that will support crowd funding from VC and PE firms. Thus boosting innovation in term-sheets and product structures.