Rehabilitation for Sick MSMEs

To encourage growth and rehabilitation or MSMEs in India, a Gazette Notification dated 29-05-2015 for ‘Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises’.  This Gazette is based on section 9 of the Micro, Small and Medium Enterprises Development Act, 2006. The prime objective is to provide an uncomplicated and speedy mechanism to support the financial stress on MSMEs and smoothen the process of development and Promotion of MSMEs in India

Furthermore, in order to make it compatible with existing regulatory guidelines on Income Recognition, Asset Classification and provisioning pertaining to Advances, Reserve Bank of India in consultation with Ministry of MSME has also issued circular “Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises” vide circular dated 17-04-2016 to all the scheduled commercial banks excluding Regional Rural Banks (RRBs).

The stipulation under this framework will be applicable to MSMEs that have loan limits up to Rs. 25 crore, this includes accounts under consortium or multiple banking arrangements (MBA). The guidelines provided for identification incipient stress in the account creating three sub categories under the Special Mention Account (SMP) category. On the basis of early warning signals, based on principal or interest payment overdue, the branch maintaining the account should consider forwarding the stressed accounts with aggregate loan limits above Rs.10 lakh to a Committee at regional or zonal level within five working days and accounts with aggregate loan limits up to Rs. 10 lakh identified as SMA-2, the account should be compulsorily examined by the branch itself under the authority of the branch manager/such other official as decided by the bank in terms of their Board approved policy for corrective action plan(CAP).

As per the guidelines, banks with the approval of their boards, should frame policy based on these instructions, on the composition of the committee, the terms of appointment of its members, manner of filling vacancies and the procedure to be followed in the discharge of the committee’s functions. All eligible stressed MSMEs shall have access to the committee for resolving the stress in these accounts in accordance with the regulations prescribed in this framework.

The RBI has asked the banks that the Board approved policy to operationalise the Framework may be put in place by the banks not later than June 30, 2016.

Ministry of MSME has a number of schemes to provide credit support to MSMEs including Credit Guarantee Fund Trust for Micro and Small Enterprises, Performance & Credit Rating Scheme, Prime Minister’s Employment Generation Programme and Credit Linked Capital Subsidy Scheme.

To enable ease of registration of MSMEs, this Ministry has notified a simple one-page registration form ‘Udyog Aadhaar Memorandum’ on 18th September, 2015 in the Gazette of India vide notification No. S.O.2576 (E). The Udyog Aadhaar Memorandum provides hassle-free instant registration of MSMEs after filing a one page online form. The salient features of the Udyog Aadhaar Memorandum include Mobile Friendly, Self-Certification, File more than one Udyog Aadhaar, No documents required, No fees for Udyog Aadhaar. As on 26th April 2016, about 619501 units were registered under Udyog Aadhaar Memorandum.