MSMEs: Beyond loan restructuring & regulatory relaxations

In the last two years, the Government and the Reserve Bank of India (RBI)  have supported the Micro, Small, and Medium Enterprises (MSMEs) by way of loan restructuring, collateral-free working capital loans,  subordinated debt,  equity infusion through the funds of funds, and special treatment under the bankruptcy code. But the MSMEs demand is increasing day by day. They are now asking for relaxation in NPA classification, interest-free loans, deferment of statutory taxes, and also rationalisation in import duties. But it is time now to think beyond loan restructuring and regulatory forbearances. In a post-Covid world, the global supply chains are witnessing a structural shift, which offers a big opportunity for Indian and global companies. The cash flow-based lending by new-age NBFCs and Fintechs should be encouraged to benefit a large number of MSMEs. The government and the RBI should also support the online trade receivables discounting platforms to improve the MSMEs' working capital cycle. Last but not least, MSMEs will also have to take a lead in the adoption of technology, digitalization of factories, and improving corporate governance. Anand Adhikari, Executive Editor, Business Today breaks it down for us.

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