12 Highlights of RBI's National MSME Policy Draft

The credit quality of micro, small and medium enterprises (MSMEs) availing loans from private sector banks and NBFCs is significantly doing better, the draft National MSME Policy highlights.

In this regard, the country's apex bank, the Reserve Bank of India (RBI) has recommended further strengthening of the information flow environment.

This, it added, would surely enhance the quality credit for public sector banks, and thereby bridge the gap of credit shortfall.

In order to provide sustained growth and capacity building in the MSME sector, the RBI panel's current recommendations majorly focus on the credit aspect for the MSMEs that has implications towards quality credit without delay and with appropriate scale.

Key Highlights from the RBI Committee in the draft policy are: 

1. Faster approval of loans through the “psbloansin59minutes” portal.
2. Ensuring timely payments to MSMEs.
3. The raising of collateral loans for the micro and small enterprises which have received comparatively lower credit pie as of medium and large enterprises.
4. In order to improve the liquidity position, the TReDS mechanism is recommended to be put in place.
5. The digital infrastructure for sharing credit information and assessing the historical performance of borrowers are needed for promotion of green-field projects in the MSME sector through joint venture mode.
6. Financial engineering in terms of inviting the private players along with new products would render the competitive lending practices to the MSMEs, thereby helping in flowing appropriate credit with reasonable cost.
7. Creating of MSME clusters to collaborate with companies offering innovation infrastructure, R&D institutions and universities that specialize in a specific industry or knowledge area.
8. Tax incentivizing the private sector for cluster development and a new intermediary i.e., Loan Service Provider (LSP) – an agent of the borrowers yield positive results in terms of enhancing the innovation of the sector and access of greater finance.
9. Other supports should also cover in terms of strengthening of MSME Export Promotion Council and a national (and state level) Council as a special purpose vehicle for crowd funding of MSMEs, out-of-court assistance to MSMEs, insurance coverage to MSME employees such as coverage under Ayushman Bharat to cope with natural calamities, etc.
10. Improvement of liquidity crunch for the MSMEs by way of providing distressed asset funds with a corpus of Rs 5000 crore.
11. Cash flow-based lending, revising collateral-free loan limit from Rs 10 lakh to Rs 20 lakh, Credit guarantee scheme for MSMEs.
12. Promoting joint ventures of private firms for investing in the MSME sector through Government Fund of Funds.