By Simran Jalan (email@example.com)
The micro, small, and the medium enterprises (MSMEs) are regarded as one of the major contributors for the development of the Indian economy. They are also one of the principal employment generators in India. Despite the important role played by them in the economic structure of the country, they continue to face constraints in obtaining adequate finance. Recognizing the importance of the MSME sector in India, the government has been bringing in several initiatives for facilitating the growth of this sector.
In the past, the government and concerned regulators have introduced various measures for the MSME sector. Earlier, the Reserve Bank of India (RBI), on February 7, 2018, came out with a notification to grant relaxation to banks and NBFCs with respect to asset classification in case of MSME accounts. Another respite was given by the RBI on June 6, 2018, by allowing banks and NBFCs to classify their exposure on all MSMEs, whether registered or not under GST, as per the 180 days past due (DPD) criterion. 
The Government on November 2, 2018, launched a “Historic support and outreach programme” for the growth, expansion and facilitation of MSMEs across the country. The intention was to unveil 12 key initiatives which will foster the growth of the MSMEs. The Prime Minister (PM), in his speech, said that there are five key aspects for facilitating the MSME sector. These are access to credit, access to market, technology upgradation, ease of doing business, and a sense of security for employees. The initiatives launched by the PM shall address to each of the aforesaid aspects for facilitating the MSME sector.
In this article, the major initiatives taken by the Government for the MSME sector has been discussed.
Some of the Key Initiatives taken by the Government
1. 59 minutes loan portal to enable easy access to credit for MSMEs
Government has launched a portal to enable easy access to credit for MSMEs. The portal has been set up by Sidbi along with SBI, PNB, Bank of Baroda, Indian Bank and Vijaya Banka with other banks joining in with the passing of time. Any MSME can avail business loan from Rs. 1 Lakh to Rs. 1 Crore through this portal, in just 59 minutes.
Once an MSME fills up the application form online and submits the required details, a single gateway will integrate platforms that will help perform back-end checks with the ministry of corporate affairs and credit information bureau for fraud before the loan is sanctioned.
The MSME, seeking for loan, can register itself in the portal without paying any registration fees. Post registration, they have to provide the required details. The existing MSMEs can apply for loan through this portal only if it is GST, IT compliant and has net banking facility. By linking online loan approvals with GST and tax returns, the government is seeking to reward those MSMEs who have obtained GST numbers.
The MSME, applying for loan through this portal, get an in principle approval in just 59 minutes. Post approval, the time taken for loan disbursement is expected to be 7-8 working days, subjected to accuracy of the information and documents provided by the MSME borrower.
This initiative of the Government is aimed to ensure easy access to credit by the MSME sector which would be a step to solve the liquidity crunch faced by this sector.
2. Mandatory registration on TReDS
All companies registered under the Companies Act, 2013, having a turnover of more than Rs. 500 crore and all Central Public Sector Enterprises (CPSE) shall now compulsorily be required to onboard on the Trade Receivables e-Discounting System (TReDS) platform. TReDS is a platform which paves ways for faster payments to the MSMEs. The MSME sector was facing problems of cash cycle which is solved by this platform. Joining this portal will enable MSMEs to access credit from banks, based on their upcoming receivables from the empaneled companies and CPSEs. The Ministry of Micro, Small and Medium Enterprises has also issued a notification in this regard on November 2, 2018.
3. Mandatory 25 percent procurement from MSMEs by CPSEs
Government had notified a new Public Procurement Policy for Micro & Small Enterprises (MSEs) on April 25, 2012. The policy mandated that 20% of procurement of annual requirement of goods and services by all public sector companies (PSC) shall be from the MSEs.
The PSCs have now been asked to compulsorily procure 25%, instead of 20%, of their total purchases from MSME. The notification in this regard is still awaited. This policy of the government is expected to promote the MSME sector by improving their market access and competitiveness through increased participation by MSEs.
Further, the PM announced that out of the 25% procurement mandated from MSMEs, 3% shall be reserved for women entrepreneurs. This shall further give a boost to the women entrepreneurs in India.
4. Increase in Interest Equalization from 3% to 5%
The Interest Equalization Scheme on pre & post shipment rupee export credit was introduced in April 1, 2015. The scheme provided the rate of interest equalization to be 3%. This meant that any exporter, who receives loans in the pre-shipment & post-shipment period, will get an interest rebate of 3%.
The Federation of Indian Export Organizations (FIEO) in its press release dated November 2, 2018 increased the Interest Equalization from 3% to 5% to provide competitiveness and level playing field to MSME exporters. This move of the government is expected to help the exporters to get credit at competitive rates close to international benchmark. This move shows that government is very keen to lend a helping hand to MSME to boost exports and create employment opportunities in the country.
It was also announced that 2 percent interest subvention will be given to all GST registered MSMEs, on fresh or incremental loans. However, the notification in this regard, is still awaited.
5. Ordinance for simplifying procedures for minor offences under Companies Act
Government has notified the Companies (Amendment) Ordinance Act, 2018 (Ordinance), under which, for minor violations under the Companies Act, the entrepreneur will no longer have to approach the Courts, but can correct them through simple procedures. This ordinance has been promulgated with an objective to promote ease of doing business. In the Ordinance, the penal provisions have been inserted in certain sections instead of levying fine for failing to comply with the provisions of those sections. This shall reduce the burden on special courts.
Subsequent to the Ordinance, the MSMEs are not required to run to courts to rectify small mistakes. They can go to the concerned departments and follow easy process to rectify the mistakes. This move of the Government will achieve corporate convenience.
6. Mandatory registration of vendors on GeM
The Finance Minister in his Budget speech for FY 2016-17, announced setting up of a technology driven platform to facilitate procurement of goods and services by various Ministries and agencies of the government. Government e-Marketplace (GeM) platform is an initiative by the government for increasing transparency and combating corruption. It is hosted by DGS&D. It is a portal to facilitate online procurement of goods and services required by various government departments, organizations and public sector undertakings in India. GeM is dynamic, self-sustaining and user friendly portal for procurement by Government officers.
PM announced that the all the public sector undertakings of the Union Government shall be a part of GeM. All the vendors of such PSUs are also required to be registered on GeM platform. This will enhance transparency, efficiency and speed in public procurement. This is a major step in creating a level playing field for all manufactures and traders. There will be bigger markets and more opportunities for the MSMEs making a win win situation for them.
The aforesaid initiatives by the Government are a great move to promote the MSME sector and reduce the compliance burden on them to enable ease of doing business. Government has already issued some notifications to bring required amendments in the applicable legislations. Further, some notifications are awaited to support the initiatives of the Government.
Furthermore, Government has also assured social security for the MSME employees and it is expected that it shall come with legislations in this regard. These initiatives of the Government are expected to go long way in strengthening in the MSME sector in India.
 Our article on the subject can be read here- http://vinodkothari.com/blog/slew-of-measures-for-msme-sector/
 Our article on the subject can be read here- http://vinodkothari.com/blog/transitory-liberalisation-of-asset-classification-norms-for-msmes/
 You can read our article here: http://vinodkothari.com/blog/highlights-of-the-companies-amendment-ordinance-2018-2/
 Updated as on November 13, 2018- Government has notified Public Procurement Policy for Micro and Small Enterprises
(MSEs) Amendment Order, 2018. The link to this amendment is: http://www.egazette.nic.in/WriteReadData/2018/192790.pdf