Budget proposes more finance, less audit for MSMEs1 min read . Updated: 01 Feb 2020, 09:21 PM IST
- Proposed measures include raising the turnover threshold for audit of MSME accounts to Rs50 million
- This subordinate debt would be fully guaranteed through the Credit Guarantee Trust for MSMEs
NEW DELHI : Finance Minister Nirmala Sitharaman Saturday proposed measures aimed at facilitating growth of the micro, small and medium enterprises (MSMEs) including raising the turnover threshold for audit of their accounts to Rs50 million and a scheme to provide subordinate debt to MSME entrepreneurs.
Working capital credit remains a major issue for the MSMEs, Sitharaman said while proposing to introduce a scheme to provide subordinate debt for entrepreneurs of MSMEs. This subordinate debt would be fully guaranteed through the Credit Guarantee Trust for Medium and Small Entrepreneurs.
The FM termed MSMEs sector as vital to keep the wheels of economy moving and creating jobs and said a scheme will be introduced to provide subordinate debt to MSME entrepreneurs. She said the government has also asked the Reserve Bank of India (RBI) to extend the debt restructuring window the sector by another year ending March 31, 2021. She said more than 500,000 MSMEs have benefitted from restructuring of debt in the current fiscal.
MSMEs account for 45% of manufacturing output, more than 40% of exports, more than 28% of GDP, and employ about 111 million people in India.
“Subordinate debt for MSMEs is a significant positive as close to three-fourth funding needs of an MSME are towards the working capital requirements," said CARE Ratings in a budget analysis paper.
The finance minister said government will amend the Factor Regulation Act 2011 to enable non banking financial companies (NBFCs) to extend invoice financing to the MSMEs that will enhance the economic and financial sustainability of these establishments.
"An app-based invoice financing loans product will be launched. This will obviate the problem of delayed payments and consequential cash flow mismatches for the MSMEs," said Sitharman.
Talking about reducing audit burden, the FM said “in order to reduce compliance burden on small retailers, traders, shopkeepers who comprise the MSME sector, I propose to raise by five times the turnover threshold for audit from the existing rupees one crore to five crore."