FISME seeks separate bank regulator

Finding itself low on RBI's priority list, MSMEs hope for a more nuanced approach from the new government.

The Federation of Indian Micro and Small & Medium Enterprises (FISME) has sought a separate bank regulator to ensure access to competitively priced and need-based credit to the Micro, Small and Medium Enterprises (MSMEs) sector. It believes that the RBI is too preoccupied with macro management of the economy and has failed to accord priority to improving the service quality for MSMEs.

FISME has also called upon the government to adopt a more nuanced approach towards different segments of the MSME sector. Anil Bhardwaj, secretary General of FISME, told Business Standard, “The MSME sector is not homogeneous but is composed of three distinct sub-sectors. The three sectors have to be dealt with and serviced separately. For micro enterprises, access to credit is a priority. For small enterprises, access to credit is available, though limited, and therefore remains important along with cost. For medium enterprises, access to institutional investors is easy. The cost is most important.” In the backdrop of the slowdown, FISME recently met Dinesh Rai, secretary, Ministry of MSMEs, and G C Chaturvedi, additional secretary, Department of Financial Services (in charge of banking), and apprised them of the MSME sector’s expectations from the new government.

FISME has emphasised the need to bolster credit lines to intermediary financial institutions such as non-banking financial companies (NBFCs), vital for ensuring flow of credit to MSMEs. It believes the success of micro-finance institutions (MFIs) could be replicated for enhancing credit delivery to MSMEs also, by facilitating creation of hundreds of intermediary institutions through fiscal and policy incentives.

The sector expects that the new government will take the decision to earmark 20 per cent share in public procurement (wherein it will procure 20 per cent of its needs from micro and small industries), a proposal pending for several years now. Bhardwaj says this will work as a lifeline in the ongoing slowdown. To ramp up exports, FISME has suggested the need to take up export promotion in ‘mission mode’ to enhance MSME participation in export from 0.5 per cent to 5 per cent in 10 years. For this to happen, the prevailing support mechanism of sole reliance on Export Promotion Councils for exposing MSMEs to export markets needs to change.

Anti-dumping and safeguard duties imposed on raw materials like steel, copper, andplastic raw material have also emerged as a big concern for MSMEs. FISME has demanded that anti-dumping and safeguard directorates should advertise prominently prior to taking up investigations and must listen to user industries. The Competition Commission should also form a standing committee to monitor cartels and instances of abuse of dominance, especially by raw material producers, it added.

Bhardwaj says that many MSMEs have suffered due to the downturn and will have to change businesses, adding, “However, the prevailing insolvency mechanism in India is defunct and there is complete absence of bankruptcy provisions. It is expected that the government will finally wake up to the criticality of these cornerstone business laws and take steps to amend and enact these much-needed legislations.”