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RBI proposes rehabilitation fund for sick MSMEs

Tags: RBI, sick MSME, K C Chakrabarty, Pranab Mukherjee, rehabilitation fund

April 16, 2012 | COMMENTS ( 0 )

RBI proposes rehabilitation fund for sick MSMEs

In the wake of rising number of sick micro, small and medium enterprises (MSMEs) in the country, the Reserve Bank of India (RBI) has suggested the government for setting up a rehabilitation fund for reviving such units.

"...Rehabilitation of sick MSMEs could not be taken up due to non-availability of promoters' contribution in a large number of cases, RBI has recommended to the government to set up a 'rehabilitation fund' for sick MSMEs," RBI Deputy Governor K C Chakrabarty said at a conclave here.

According to RBI data, the number of sick units in MSME sector has gone up by 16% to 90,141 units in March 2011 from 77,723 in March 2010.

On the MSE (Medium and Small Enterprises) loan policy, he stated,"...Banks have also been advised to review and put in place MSE loan policy, restructuring or rehabilitation policy and non-discretionary one time settlement scheme for recovery of non-performing loans, duly approved by their board of directors".

Chakrabarty, during the conclave last week, also said that in spite of various measures taken by the RBI and the government, availability of credit for the sector remains a major issue.

"There is a need to implement a corporate governance code for SME sector and adoption of corporate governance framework by SMEs in India is indispensable for taking this sector to a higher growth trajectory," he added.

Chakrabarty also mentioned that there is a growing need for venture or risk capital for financing high growth potential and start-up SMEs.

Finance Minister Pranab Mukherjee in his Budget 2012-13 has proposed setting up a Rs 5,000 crore 'India Opportunities Venture Fund' with SIDBI to enhance availability of equity to the SME sector.

Expressing concern over the flow of equity capital in the sector, Chakrabarty said, "At present, there is almost negligible flow of equity capital into this sector. SEBI has permitted BSE and NSE to set up an exchange for MSMEs, which would help SMEs to raise funds from capital markets".

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