New Delhi: The government is likely to provide Rs 1,000 crore for two funds for the micro, small and medium enterprises (MSMEs) in the upcoming Budget.

According to a report in the Times of India newspaper, the government may announce a Rs 10,000-crore fund-of-funds to support private equity and venture capital fund for MSMEs, and a Rs 5,000-crore fund to deal with distressed assets in the Budget.

The funds will be allocated in tranches and provision for the first tranche of Rs 500 crore each will be made in the Union Budget 2020, the publication mentioned. Both the funds had been proposed by a committee appointed by the Reserve Bank of India, which was headed by former Sebi chairman U K Sinha. 

Unlike in the past when Sidbi was tasked with managing funds related to MSMEs, this time the fund of funds is expected to be handled by SBI Caps, while the distressed assets fund is expected to be run by a new entity that the government is expected to set up to deal with other issues, including viability gap funding, sources told the daily.

The publication further said that the distressed asset fund will also receive a guarantee from the Credit Guarantee Fund Trust for Micro and Small Enterprises, which was set up by the government and Sidbi a few years ago. “The structure has been worked out and is expected to help tackle the financial stress that the sector has been facing in recent years,” the publication said.

The issue of distress in the MSME sector was discussed and a special window was also discussed at a recent meeting of the Cabinet Committee on Investment and Growth. While the distressed asset fund will help address some of the concerns of the viable units, banks have also proposed that the government put in place a special mechanism under the Insolvency and Bankruptcy Code to deal with the sector.

Worth mentioning here is that entrepreneurs often put their entire savings into running an MSME unit, but they find it difficult to raise more resources when their business faces financial problems.

Published On : 24-01-2020

Source : Timesnownews