A Reserve Bank of India (RBI) expert committee has suggested a Rs 5,000 crore stressed asset fund for domestic micro, small and medium enterprises (MSMEs). Micro, Small and Medium Enterprise (MSME) sector has emerged as a very important sector of the Indian economy, contributing significantly to employment generation, innovation, exports, and inclusive growth of the economy. However, MSMEs continue to face challenges of formalization, access to knowledge services, access to timely and adequate finance, improving competitiveness, availability of skilled man-power, access to latest technology and marketing. The MSME sector is yet to benefit from the advances in digitization, which can substantially reduce the cost and time for this sector. SHGs and rural entrepreneurship have made very good progress in the last few years, but creating the environment for the next stage of their growth is a task yet to be accomplished. The sector was also affected in the recent past due to structural changes in the economy.

In this backdrop, Reserve Bank of India constituted the Expert Committee on MSMEs to undertake a comprehensive review of the sector and to identify causes and propose long-term solutions, for their economic and financial sustainability. MSEs face problems of delayed payments and hesitate to enforce the legal provisions available to them under the MSMED Act due to their low bargaining power. The Committee recommends amendment to the MSMED Act requiring all MSMEs to mandatorily upload all their invoices above an amount to be specified by Government, from time to time, to an Information Utility.

As per the MSMED Act, Government has notified procurement policy wherein PSUs/ Government Departments have to make 25% of their procurement from MSEs. To further strengthen the procurement mechanism, the Government has also launched the GeM portal. The Committee recommends that Government should make it mandatory for PSUs/ Government Department to procure from MSEs up to the mandated target of 25% through the GeM portal only. Further, the portal can be developed as a full-fledged market place enabling MSE sellers to procure raw-material as well.