MSMEs' Financial Architecture to be Simplefied

In the previous Union Budget, there was an announcement made with regards to setting up of a committee to examine the financial architecture of the MSME sector. The Finance Minister urged the policy makers to provide concrete suggestions within three months Now, the Department of Financial Services, Ministry of Finance has come out with the composition and terms of reference of the committee.

The Committee would assess the current structure of flow of finance to MSME sector – delivery channels, products and services and policy environment.  It would also make a comparison with financial architecture in other developed and emerging economies to ensure strong support to MSMEs, a notification from the Department of Financial Services said.

In addition, the committee would analyse the gap areas and suggest measures for addressing the same to bring about significant improvement in India’s position in ease of starting business and ease of doing business indices for speedy growth of the sector.

Further, gap areas would be analysed in: the role and scope of financial intermediaries – both existing as well as proposed; financial products and services; incentives and risk mitigation / credit enhancement measures; and medium term and long term policy prescriptions and directions.

The committee would also give special emphasis to certain aspects and come up with concrete suggestions.  These include improving the share of institutional finance to MSME from low level currently seen; regional disparities in credit flow to MSMEs; credit for self-employment based MSEs, particularly those established by SC/ST/OBC entrepreneurs.

The TOR indicates that focus will be given to innovative financial products for MSMEs; and ways to increase flow of equity support to MSMEs by targeting incubator based funds, angel/seed funds, impact funds and VC/PE funds.

The committee would comprise of Chairperson, ICICI Bank, K V Kamath who will be the Chairperson of the Committee.  It would also include Secretary, Ministry of MSME or his nominee not below the rank of Joint Secretary; Secretary, DIPP or his nominee not below the rank of Joint Secretary; Secretary, Department of Skill Development and Entrepreneurship or his nominee not below the rank of Joint Secretary.

Other members are CMD, Bank of Maharashtra, Sushil Muhnot and ex-CMD, SIDBI; Representative of RBI not below the rank of CGM; DMD SIDBI; CEO Indian Bank Association; Representative of FISME; Cremica Food, Ludhiana, Rajni Bector; Founder, Indian Angel Network, Saurabh Srivastava; Professor, IIM Bangalore, R Vaidyanathan; FCA, Gopal Aggarwal; CEO, Axis Capital, Nilesh Shah; and DFS, Joint Secretary (IF) who will be member secretary.