Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
Industry News

| More

Fresh impetus to the MSME sector - Acuité Ratings

Posted On: 2018-11-08 09:54:34

Acuité Ratings believes that the recent steps announced by the Government of India will continue to reinforce the presence of an enabling framework for the growth of MSMEs and further enhance the formalisation of the sector through several digital initiatives. MSMEs had displayed an encouraging performance in FY 18 (please refer to our article "Signs of Vibrancy in the MSME sector" dated June 25, 2018) and it is important that they continue to enjoy a supporting environment to continue their growth path and tackle the headwinds on their way.

Given the difficult capital position and the regulatory restrictions on a large section of public sector banks, the banking sector advances to the micro and the small enterprises sector dropped marginally by 0.4% in the last one year (Oct-Sept 2018). While NBFCs have grown their lending portfolio to this sector steadily, such growth is also subject to a slowdown in the context of the recent credit event and the resultant funding challenge in NBFCs. The government through the latest measures have attempted to address three aspects which are (i) funding and borrowing costs (ii) strengthen demand for their products and services (iii) remove bottlenecks and challenges in terms of government clearances.

The government's decision to launch an online portal for small loans up to Rs. 1.0 Cr with back end support from SIDBI and a few public sector banks is expected to bring the focus and the priority back to small enterprise lending. Importantly, the linkage of credit availability with the registration in GST will go a long way in further increasing the formalization in the sector. This will not only improve the access of micro enterprises to formal lending sources (i.e. banks or NBFCs) but also provide some relief on interest costs with the announcement on interest subvention. Given the typically higher interest rates applicable to such enterprises especially those without the ability to offer adequate collateral, the interest rebate of 2% on regular loans and 3%-5% for export credit will help to improve their profitability. However, the most significant step to address the funding and working capital challenge for MSMEs is to ensure the presence of all large corporates with turnover greater than Rs. 500 Cr in the "Trade Receivable e-Discounting System," (TReDS), a digital and GST enabled platform that will help in the discounting and factoring of receivables by banks.

The government has also proposed measures to strengthen the presence of MSMEs in the large business ecosystem. The public sector companies need to procure at least 25% of their requirements from MSMEs and at least 3% out of that proportion from businesses managed by woman entrepreneurs. Further, an impetus has been given to the Government e-Marketplace (GeM), a digital portal for procurement of common goods and services by government agencies. CPSEs are mandated to be a part of such a platform and register their vendors herein, thereby furthering the formalisation of the MSME ecosystem. An analysis by Acuité Ratings, however indicate that CPSEs are currently sourcing only 12.4% of their requirements from MSMEs, implying the adherence to such a guideline needs to step up for it to be effective. The government has also announced an investment of up to Rs. 6000 Cr to support the technology upgradation of the MSMEs in the manufacturing sector. The investment is proposed for setting up tool rooms across the country that will facilitate advanced product design and improve the competitiveness of MSMEs. The government also plans to focus on setting up new clusters in the pharma sector which have a significant potential in terms of employment and exports.

The government has additionally taken a few steps to address the compliance and regulatory challenges in the MSME sector. A single clearance has been proposed for environmental clearance as against multiple approvals required in the past. The inspection norms for MSMEs are also expected to be streamlined. The government also plans to bring an ordinance to bring about necessary changes in the Companies Act and ensure that minor violations under the Act can be addressed through simple procedures, thereby avoiding the cumbersome process through the courts of law. MSMEs also will need to file a single annual return on eight labour laws and ten central rules, thereby simplifying the requirements in this regard.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com





Other Headlines:

Square Capital Emerges as the Largest Integrated Mortgage Marketplace in India

GoAir's 13th Anniversary Offer: Up to 13 Lakh seats on sale at an all-inclusive price of Rs 1,313

India's plastics export jump 31.6% in H1 2018-19 to USD 4.59 bn

Homes worth Rs 1200 crore sold during Housing.com's Home Ustav 2018

Not just top 5 cities, now Tier III cities also contributing to retail participation in stock markets

Lighthouse invests 160 Crore in mattress company Duroflex

Kreditech licensed by Reserve Bank of India to operate as NBFC

Next Education partners with Capgemini as Edu-tech enabler

Co-origination lending: A potential solution to NBFCs' funding challenges

Honda 2Wheelers India expands its global footprint ahead of 2020

'All Weather Investing' - asset allocation with ETFs launched on smallcase.com

NPCI organises digital training workshops at 50 plus educational institutes on teacher's day

AVIVA launches Online Will Writing Service to Promote Financial Literacy

Chrysalis raises funding from Social Impact Investors Menterra and Artha

ICAI invites comments on Valuation Standards

Maharashtra New DP plan 2034 notification - Mr. Niranjan Hiranandani, President NAREDCO

Sterlite Power's OPGW facility receives 17025:2005 accreditation by NABL

Amazon.in adds 6 new fulfilment centers for Large Appliances and Furniture

Asset Management Firm Samvitti Capital launches new Alternative Investment Fund

ICAI committed to conclude the disciplinary process against those found involved in the PNB scam

Fintech startup BuyForexOnline looks to raise $2m for its next phase of growth

Wipro Consumer Care and Lighting forays into home automation space

Catholic Syrian Bank announces proposed investment by Fairfax India

KIFS Tade capital launches interactive Chatbot service #AskSubbu

Moneycontrol becomes India's first financial platform to launch a dedicated section on Cryptocurrency

DBS Group Chairman Peter Seah conferred Institute of Directors (IOD), India Distinguished Fellowship

Essar concludes sale of Aegis to Capital Square Partners for US $ 300 Million (Approximately Rs.2,000 crore)

ESAF Small Finance Bank kicks off operations in Mumbai

2.0 Audio Launch Sets Benchmark for International Film Events in Dubai

BSE and Ebix Sign MOU to Launch Joint Venture Company

Comments on on 'Pradhan Mantri Sahaj Bijli Har Ghar Yojana' - Power for All

SVC Bank launches hassle-free ASBA facility for IPOs

Flipkart's Big Billion Days To Kick In From September 20

Genpact Acquires Digital Customer Experience Consulting Firm TandemSeven

PAYBACK India Announces Appointment of new CEO

IndiaFirst Life acknowledged with Social Inclusion Award 2017 by Fintelekt

Apollo Munich Launches India's First Travel Insurance Chatbot - 'Travel Ninja'

On its run up to an IPO, ShopClues appoints Deepak Sharma as CFO

Cognizant Opens New Digital Business Collaboratory in London

Morphy Richards appoints J Walter Thompson as their creative agency

edX partners with IL&FS / IFIN to launch learning academy

PAYBACK India wins the Best Loyalty Program 2017 award at CMO Asia 'National Awards for Marketing Excellence'

Hyundai Launches the Most Unique & Global 'Online Buying Experience'- 'HyBuy'

Myntra launches The Game of Thrones collection ahead of the much awaited season 7

DBS Bank Strengthens India franchise on 24% growth in advances and 15% in deposits during FY 2016-17

Apollo Munich Health Insurance ranked as top 'Great place to Work' in Indian Insurance Sector

92.7 BIG FM's New and Refreshed Stationality in Bengaluru, Celebrates Music With 'Sandalwood Jothe Bollywood Blast'

Omega Healthcare inaugurates 4th facility in Trichy

Broadridge Opens Fourth Office in India in Bangalore

Myntra targets 25x sales; 4 lakh new customers during the 6th edition of its flagship - 'End of Reason Sale'!







Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2018