Reserve Bank of India panel for Rs 15,000 crore fund to support MSME space

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Mumbai: The U K Sinha Committee, set up by the RBI on micro, small and medium enterprises, has recommended a financial support of Rs 15,000 crore to the MSME sector, which contributes significantly to employment generation and has as a hefty share of over 40 per cent in exports. The contribution of the sector in the economy is currently constrained due to several challenges affecting growth in the sector, said the report submitted by the nine-member committee to the Reserve Bank of India (RBI) Tuesday. The committee recommended setting up of a government-sponsored ‘fund of funds’ (FoF) of Rs 10,000 crore to support the venture capital and private equity firms investing in the MSME sector that will support crowd funding from venture capital and private equity firms, which focus on investing in the MSME segment on modified terms sheets developed by SIDBI.

“This would encourage innovation in term sheets and product structures,” the committee said in its recommendations. The panel also recommended that a Rs 5,000-crore distressed asset fund be structured to assist units in clusters where a change in external environment, such as a ban on plastics or dumping, has led to a large number of MSMEs becoming non-performing assets (NPAs). This fund could operate on the lines of the Textile Upgradation Fund Scheme (TUFS), which has been in existence for many years. This would be of significant size which makes equity investments that help unlock debt or help revive sick units, it said.

The committee also recommended introduction of voluntary certification of MSMEs that comply with prescribed internal governance standards. The MSME sector has emerged as an important sector of the Indian economy contributing significantly to employment generation, innovation, exports, and inclusive growth of the economy, however under the changed circumstances, it is imperative to bring about changes in the MSMED Act, 2006, according to the report.