Package for rehabilitation of sick MSEs

The Reserve Bank of India (RBI) in a bid to give fresh lease of life to what it considers as potentially viable sick MSMEs has issued fresh guidelines to banks to take corrective measures for their rehabilitation.

This was informed by the Minster of State (Independent Charge) for Micro, Small and Medium Enterprises (MSMEs) Dinsha Patel recently in the Lok Sabha.

For the rehabilitation of sick Micro and Small Enterprises (MSEs) financial assistance in the form of debt restructuring, which includes offering fresh loans by primary lending institutions (PLIs), comprising commercial banks that lend credit to the MSEs.

In this regards, the Reserve Bank of India had issued guidelines to banks in January 2002 to detect potentially viable sick MSE at a very early stage and then take corrective measures for the rehabilitation.

On 8th September 2005, RBI based on the “Policy Package for Stepping up Credit to Small and Medium Enterprises” had issued guidelines on debt restructuring mechanism for small and medium enterprises (SMEs)

To surmount the problems encountered by the MSEs due to global economic slowdown RBI has also spoken about second restructuring to be carried out by the banks to be qualified for exceptional regulatory treatment.

Also, RBI has suggested all scheduled commercial banks on May 4 2009, to adhere to RBI’s guidelines on debt restructuring and put in place their own non-discretionary one-time settlement (OTS) policy for the MSE sector.

List of States and Union territories having sizeable number of sick MSMEs that are under the rehabilitation process:

State/UT Number of Sick MSMEs under rehabilitation Gujarat 573 Uttar Pradesh 876 Tamil Nadu 204 Maharashtra 99 Delhi 92 Kerala 79 Madhya Pradesh 74 Chandigarh 69 Karnataka 67 Chhattisgarh 58 Orissa 28 Haryana 12 Andhra Pradesh 20

MSMEs having being playing a significant role in India's growth story. The finance ministry has informed that micro, small and medium enterprises in the future might contribute 10% to GDP from the current level of eight per cent. However, the industry is keenly looking forward to government aid in the areas of technological upgradation, skill development and promotion of the products through marketing. At present the sector employs 60 million people and contributes nearly 40 per cent to total exports.

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