Government Should Make Provisions In IBC For Priority Settlement Of MSME Provider Contributions, Expert Says

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Kalantri also felt that NITI Aayog should organize a stakeholder consultation with MSMEs and their associations before preparing a policy framework for the sector.

Ease of doing business for MSMEs: The government should introduce provisions under the Insolvency and Bankruptcy Act (IBC) for the priority settlement of MSME seller dues owed by the insolvent company, as banks do not want to extend accommodating treatment to MSME sellers who defaulted due to late payments from their corporate buyers, according to Vijay Kalantri, president of the Indian Association of Industries (AIAI) and chairman of the World Trade Center.

During a webinar hosted by AIAI, Kalantri said: “In cases of insolvency under the IBC, contributions owed to MSME providers are not given priority in the order of payment of contributions from creditors. . If MSME sellers do not pay their dues on time, it is natural for them to default on their bank loan obligation. “In April this year, the government introduced an ordinance for a prepackaged insolvency resolution process for MSMEs under the IBC to act as an alternative insolvency resolution framework for” a resolution. rapid, efficient and profitable distress, thus ensuring a positive signal to the debt market, the preservation of employment, the ease of doing business and the preservation of company capital, ”the Ministry of Business said commercial.

In terms of low formal credit flow to the MSME sector, Kalantri noted that commercial bank credit to the sector increased from 12.4 percent of total credit before 2008 to 8.3 percent in the following period. . In addition, public sector banks lag behind the private sector in disbursing credit to MSMEs, with the former providing just 5 percent of their credit to MSMEs, compared to 40 percent by the latter. Kalantri urged commercial banks to open dedicated SME branches across the country and also called for the conversion of SIDBI into a full-fledged bank for SMEs.

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Among major public sector lenders, the Bank of Baroda said it expects overall credit growth of 10 percent in the core SME segment in the current fiscal year, compared to growth of 10 percent. 11 percent recorded the previous year, mainly supported by the Emergency Credit Guarantee (ECLGS). According to a senior bank official, “SMEs can obtain a sanction in principle for their loan application up to Rs 5 crore by uploading their financial statements and other documents to our mobile application and our banking and corporate website … We have introduced the automatic approval of an MSME loan up to Rs 0.25 crore across India and loans up to Rs 5 crore are mainly digitally sanctioned and we intend to sanction and disburse loans digitally shortly as part of the co-lending model.

Kalantri also felt that NITI Aayog should organize a stakeholder consultation with MSMEs and their associations before preparing a policy framework for the sector. “NITI Aayog is working to build a digital capability center to transform India’s manufacturing sector in this era of the Fourth Industrial Revolution. Already, NITI Aayog has enabled, as part of its national strategy on artificial intelligence, centers of excellence through its various MedTech zones, special technological zones and via AIRAWAT, which is a concept of shared technological resources to facilitate access of MSMEs to advanced technologies such as 3D. printing and artificial intelligence, ”said Preeti Syal, Director, NITI Aayog.

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