Govt’s MSE support schemes lost in implementation maze

Struggles Persist:

• MSMEs often lack awareness about govt schemes, hindering their benefits
• Financial institutions are slow in disbursing credit to MSMEs despite govt initiatives
• India boasts 60 mn mfg units contributing significantly to workforce and exports

Hyderabad: The Finance Minister Nirmala Sitharaman announced a slew of measures in the seventh Union Budget 2024, to bolster growth of MSMEs in the country. Few of them includes, credit guarantee scheme, enhanced limit of Mudra loan, turnover threshold of buyers reduced for onboarding on TReDS platform, and others. However, micro and small enterprises (MSEs) lacking awareness about the schemes, and financial institutions faltering on releasing credit, draws a different picture at the ground level, says expert.

According to Udyam Registration Portal, in FY23, 13,290 Udyam-registered MSMEs shut down shop, when compared to 6,222 units in FY22, and 175 units in FY21. As of July 18, 2024, 5,152 units have winded up operations.

“If someone wants to establish a business they can get a collateral free loan of up to Rs 5 crore, assuming their business plan and financials are strong. As mandated by the Centre these units are supposed to get the first line of credit under CGTMSE. But that is not happening,” Convenor of MSME panel at CII Telangana, TN Dhanraj Tirumala told Bizz Buzz.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is jointly set up by Ministry of MSME, Government of India and Small Industries Development Bank of India (SIDBI), to catalyse flow of institutional credit to MSEs. Credit Guarantee Scheme was launched to strengthen credit delivery system and to facilitate flow of credit to the MSE sector.

CGTMSE’s online portal mentions that, over the past two decades, it has been instrumental in providing guarantee cover to collateral and third party guarantee free credit facilities extended by eligible Member Lending Institutions to MSEs. In FY23, CGTMSE has approved guarantees worth Rs 1 lakh crore.

Tirumala highlighted that India has 60 million manufacturing units contributing 50 per cent to the total workforce and 40 per cent of the exports. “There are more than 500 government schemes to support MSMEs in ease of doing business. For these schemes to be successfully implemented, the agencies administering these schemes have to be sensitized. The second challenge that needs to be addressed is making entrepreneurs aware about the available schemes. Industry body like CII has been working towards this.”

The new Credit Guarantee Scheme, announced during the Union Budget, will facilitate term loans for purchasing machinery and equipment without collateral. This self-financing guarantee fund will cover up to Rs 100 crore for each applicant, while the loan amount can be larger.

One of the recommendations the Confederation of Indian Industry had laid in front of the Finance Ministry was classification of non-performing assets (NPA) from 90 days to 180 days. Tirumala went on to say, “We were looking for a specific announcement. I will have to go through the fine print to get better clarity. What we had asked from the government was to extend the threshold period for stress loan accounts under the Special Mention Account-2 category from the current 90 days to 180 days. If within 90 days one is not servicing the loan, it is tagged as NPA, and that is one of the reasons behind why most MSMEs are going out of business.”