A plan to provide subordinated debt to MSME entrepreneurs will be presented: Government

NEW DELHI: The government On Saturday he said that a scheme will be introduced to provide subordinated debt to MSME entrepreneurs.

The government has also asked the to extend the Debt Restructuring window for micro, small and medium enterprises by a year to March 31, 2021, in measures aimed at imparting a thrust to the MSME sector, finance minister said while presenting the budget for 2020-21.

An application-based billing loan product will be launched. This will avoid the problem of late payments and the consequent cash flow mismatches for it.

She said the necessary modifications to the Factors Regulation Act of 2011 will be made to allow non-bank financial companies (NBFCs) to extend invoice financing to MSMEs through TReDS, thereby improving economic and financial sustainability.

Credit remains a major problem for MSMEs. It is proposed to introduce a scheme to provide subordinated debt to MSME entrepreneurs. This subordinated debt to be provided by the banks would count as quasi-capital and would be fully guaranteed through the Environmental Guarantee Trust and, Sitharaman observed.

TReDS is an institutional mechanism to facilitate the receivable commercial financing of micro, small and medium enterprises (MSMEs) of corporate buyers through multiple funders.

Highlighting that more than five lakh MSMEs have permitted from restructuring of debt permitted by RBI in the last year, she said the restructuring window was to end on March 31, 2020 but the government has asked RBI to consider extending this window till March 31, 2021.