The Reserve Bank has suggested setting up a rehabilitation fund for reviving sick micro, small and medium enterprises (MSMEs) in the wake of rising number of such units.
"...rehabilitation of sick MSMEs could not be taken up due to non-availability of promoters' contribution in a large number of cases, RBI has recommended to the government to set up a 'rehabilitation fund' for sick MSMEs," RBI Deputy Governor K C Chakrabarty said at a conclave in Mumbai.
According to RBI data, the number of sick units in MSME sector has gone up by 16 per cent to 90,141 units in March 2011 from 77,723 in March 2010. On the MSE (Medium and Small Enterprises) loan policy, he said,"...banks have also been advised to review and put in place MSE loan policy, restructuring or rehabilitation policy and non-discretionary one time settlement scheme for recovery of non-performing loans, duly approved by their board of directors".
Chakrabarty, during the conclave last week, also said that in spite of various measures taken by the RBI and the government, availability of credit for the sector remains a major issue.
"There is a need to implement a corporate governance code for SME sector and adoption of corporate governance framework by SMEs in India is indispensable for taking this sector to a higher growth trajectory," he said.
Chakrabarty also said there is a growing need for venture or risk capital for financing high growth potential and start-up SMEs.
Finance Minister Pranab Mukherjee in his Budget 2012-13 has proposed setting up a Rs 5,000 crore 'India Opportunities Venture Fund' with SIDBI to enhance availability of equity to the SME sector.
Expressing concern over the flow of equity capital in the sector, Chakrabarty said, "At present, there is almost negligible flow of equity capital into this sector. Sebi has permitted BSE and NSE to set up an exchange for MSMEs, which would help SMEs to raise funds from capital markets".
According to the data provided by the 4th Census of the MSME sector, about 92.77 per cent of units had no access to finance or depended on self-finance.
It said only 5.18 per cent of units availed finance through institutional sources with a further 2.05 per cent relying on non-institutional sources.
"In this regard, the various initiatives taken by the government and RBI include adoption of the business correspondent (BC) model, relaxation of KYC norms, simplified branch authorisation, mandatory opening of 25 per cent of new branches in unbanked rural centres etc...," Chakrabarty said.
However, the SME sector often feels the constraint of non-availability of skilled labour, he said.
The government and various state governments have been implementing a number of schemes and programs over the years.
The MSME ministry aims to train 5.72 lakh persons in the year 2012-13 through its various programmes for development of self-employment opportunities as well as wage employment opportunities in the country.
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