Measures to boost funding to SMEs in the offing

Easier listing norms, bankruptcy code among measures likely to be announced in Budget session

A slew of measures are in the pipeline to boost funding for the Small and Medium Enterprises (SMEs), including making listing norms easier for these companies and a bankruptcy code among other measures.

The measures are likely to be announced in the Budget session, said sources.

For their funding needs, the SMEs generally reach out to banks, specially the public sector banks, for seed as well as additional capital. But bankers say many SME loans have turned as Non Performing Assets (NPAs) for them.

"SMEs are stressed for funds. Due to high debt-equity ratio, PSBs cannot give additional loan to SMEs though such companies may have a good growth potential," said an official with a public bank.

To meet the capital requirement, banks could nudge SMEs to list on the SME platform or the Institutional Trading Platform (ITP).

The SME platform with the exchanges allows SMEs to list without the mandatory Initial Public Offer (IPO). So, far there are close to 100 SMEs listed on the SME platform of NSE and BSE, with over 90 SMEs listed on BSE alone.

According to officials, the numbers are a cause for worry as they are well below the government's and regulator's expectation. Further, Sebi has said SMEs could be guided towards merchant banking outfits to make it feasible for these companies to list.

"Banks could be asked to identify investors, through their advisory services, who can invest in such SMEs," said a source.

The ministry has also asked Sebi to streamline and remove the roadblacks that are preventing more SMEs from using the platform. Sebi is in the process of reviewing the rules related to SMEs.

"We are examining issues such as additional fund raising on ITP," said an official

Other concerns that the regulator is dwelling on include the eligibility criteria, the lot size and the lock-in period for investment. To give further impetus to this crucial sector, the government is also likely to introduce a bankruptcy code for SMEs in the budget session, which would be entrepreneur friendly.

A revised definition of Micro and Smalll Medium Enterprises (MSME) is also in the offing that could provide for a higher capital ceiling.

A program to facilitate forward and backward linkages with multiple value chain of manufacturing and service delivery will also be put in place.