Budget 2020-21: Major relief for MSME sector, govt may announce Rs 5,000 crore distressed asset fund in Budget

In a bid to give relief to the micro, small and medium enterprises or MSMEs facing liquidity crunch, the government is likely to announce a distressed asset fund of Rs 5,000 crore and a government-sponsored fund of funds of Rs 10,000 crore for the private equity firms and corporates interested in investing in the MSME sector in the Budget 2020-21. Both these funds had been recommended by the RBI panel formed under UK Sinha, former chairman of securities and exchange board of India or SEBI for the small businesses last year. 

"Both these funds will likely get approval in the budget session, post which a mechanism will be framed to get this fund operational. There will be some parameters, which the small businesses will have to fulfill to avail the benefits of this fund," a government source in the know of this told Zee Business."

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Small businesses that have been adversely impacted by the natural calamities like drought, flood and earthquakes will be able to avail this fund," the source cited above further told.

The Reserve Bank of India in January, last year, had formed an eight-member- committee to make suggestions to support small businesses that have been badly affected by external factors like 'ban on plastic' and 'dumping', turning a large number of MSMEs into NPA.

Prime Minister Narendra Modi also met the MSME Minister today to discuss the recommendations made by RBI panel to remove financial stress from the sector, according to sources. Delayed payment to MSME, which is a big issue for small businesses is one of the important issues being discussed with Modi.

MSME sector contributes significantly to the Indian economy. According to the government data, the MSME share in GDP in 2016-17 was 28.9 percent. In 2016-17, there were total of 633.88 lakh MSMEs engaged in various economic activities like manufacturing, trade, other services and non-captive electricity generation and transmission. The sector plays a pivotal role in job creation also and according to CII survey, in last four years most of the jobs were created by the MSME sector only. As per the national sample survey round conducted in 2015-16, the MSME sector created 11.10 crore jobs in rural and urban areas across the country.