The Reserve Bank has sought feedback on a concept paper that discusses the subject of financing the micro, small and medium enterprises (MSME).
The Reserve Bank has sought feedback on a concept paper that discusses the subject of financing the micro, small and medium enterprises (MSME).
The concept paper on 'Trade Receivables and Credit Exchange for Financing MSMEs' seeks to address the concerns related to financing the sector given its potential in growth, employment and inclusion in economy and society.
"...This concept paper has been prepared taking into account the interest expressed by few entities and in consultation with a few stakeholders. Though it is desirable to implement such a model for the benefit of a vast section of business entities in the country, it is also imperative to understand and address the many issues and challenges," outlines the preface of the concept paper.
RBI said MSME segment continues to face problems of delayed payments and dependency on their corporate buyers, despite efforts on multiple fronds as well as enabling legal and regulatory provisions.
The concept paper says that one of the constraints impacting the MSME sector is inadequate finance, particularly working capital.
"In the case of MSMEs, the need for quick conversion of trade receivables, an important component of current assets of business entities, into cash assumes great importance since the lack of opportunities affects their liquidity and thereby their business, quite significantly," says the paper.
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