During January 2020, there was a broad-based decline across all 4 indices, according to CARE Ratings' Monthly SME Roundup report. Broad indices including Sensex and Nifty ended lower by 1.3% and 1.7% respectively during the month. Both the SME indices also ended lower with Nifty SME Emerge Index registering a decline of 0.1% while BSE SME IPO index recording a steep decline of 4.1%.
In January 2020, the Government also presented the budget with a slew of positive measures aimed at the MSME sector. The total allocation made to the Ministry of Micro, Small and Medium Enterprises in FY21 stood at Rs 7572 crores, 8% higher from the revised estimates of FY20(RE). Budget saw introduction of a scheme to provide subordinate debt for entrepreneurs of MSMEs which will be counted as quasi-equity and will be fully guaranteed through Credit Guarantee Trust for Medium and Small Entrepreneurs. The turnover limit for businesses to get their books of accounts audited by an accountant was raised from Rs 1 crores to Rs 5 crore which would benefit the MSME segment.
It also proposed to extend the window for restructuring of bank loans availed by MSMEs till
March 31, 2021 has been put in front of the RBI o Enabling NBFCs to extend invoice financing to the MSMEs through TReDS which will enhance their economic and financial sustainability. Budget also announced the launch of App-based invoice financing loans product to obviate the problem of delayed payments of MSME.
The bank credit to MSMEs has grown at a CAGR of 15% in the last decade. Services sector accounts for over 60% of the total bank credit disbursed to MSME sector and thus has been driving the overall MSME credit. As of November 22, 2019, the outstanding credit disbursed to MSME segment totalled Rs 10.57 lkh crs. The incremental bank credit to MSME segment has witnessed a contraction of 0.9% during March- November 2019 compared with negligible growth in the comparable period a year ago. The incremental credit to manufacturing segment contracted by 3.3% during the period while the incremental credit to services sector witnessed marginal growth of 0.4%.
Meanwhile, following preparation of a draft discussion paper on “Promoting Technology Adoption by MSMEs – Mission Document” by the MSME Ministry, it has sought comments from the stakeholders for the same. This mission focusses on activities modelled around seven different pillars including emerging technology, human capital, access to finance, infrastructure, market place, policy and governance, and knowledge creation.
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