Govt proposes framework for revival of sick MSMEs

Government has proposed a draft framework to help the micro, small and medium enterprises tide over financial difficulties, including by providing them easier credit facilities from banks.
The MSME Ministry has sought comments within 15 days on the draft framework, titled 'Udyog Bandhu' (Friend of the Industry), for revival of distressed micro, small and medium enterprises.
"Issues related to sickness of MSMEs, Non-Performing Assets and exit policy have been raised from time to time in different quarters. Various Committees and Expert Groups have also made suggestions in this regard.
"The Ministry of Micro, Small & Medium Enterprises, now, proposes to address this issue through a notification under the Micro Small & Medium Enterprises Development Act, 2006," the MSME Ministry said in a memorandum.

The objective of the draft framework is to help MSMEs seek standard as well as customised relief and concession to tide over difficult financial times.
Besides, it seeks to provide an easier and expeditious procedure for the benefit of promoters and guarantors to unlock the potential of asset and job creation.

"Subject to any regulations prescribed by the Reserve Bank for this Order, all banks shall constitute one or more Committees at such locations as may be considered necessary by the board of directors of such bank to provide reasonable access to all eligible MSMEs which have availed credit facilities from such bank," the Ministry said.

The draft framework prescribes the guidelines under which any eligible distressed MSME, or a bank which has provided credit facilities to such enterprise, may file an application to the Committee in the prescribed manner for a decision on a Corrective Action Plan (CAP).
If an MSME has availed credit facilities from more than one bank, the application shall be made to the Committee of that bank to which the enterprise owes the maximum amount of debt.
Such committee may include representatives from all concerned banks, while participating banks would cooperate with each other in all proceedings. In case of a disagreement between participating banks, it would be resolved in accordance with regulations prescribed by the RBI.

Under the Corrective Action Plan, the committee may explore various options to resolve the stress in the account. The intention is not to encourage a particular resolution option, such as restructuring or recovery, but to arrive at an early and feasible solution to preserve the economic value of the underlying assets as well as the lenders' loans, the Ministry said.