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Will Launch Scheme To Give Subordinate Debt to MSME Entrepreneurs: Finance Min

Finance Minister Nirmala Sitharaman. (AFP)

Finance Minister Nirmala Sitharaman. (AFP)

The government has also asked the Reserve Bank to extend the Debt Restructuring window for MSMEs by a year to March 31, 2021.

  • PTI
  • Last Updated: February 1, 2020, 4:16 PM IST
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New Delhi: A scheme will be introduced to provide subordinate debt to MSME (Micro, Small and Medium Enterprises) entrepreneurs, said the government on Saturday. It has also asked the Reserve Bank to extend the Debt Restructuring window for MSMEs by a year — to March 31, 2021.

The measures are aimed at imparting a thrust to the MSME sector, Finance Minister Nirmala Sitharaman said while presenting the Budget for 2020-21. "An app-based invoice financing loans product will also be launched," she said, adding that this would end the delayed payments and cash flow mismatches for MSMEs.

The finance minister said that necessary amendments will be made to the Factor Regulation Act 2011. This will enable non banking financial companies (NBFCs) to extend invoice-financing to MSMEs through TReDS; enhancing economic and financial sustainability.


"Working capital credit remains a major issue for MSMEs. In the proposed scheme, subordinate debt to be provided by banks would count as quasi equity and would be fully guaranteed through the Credit Guarantee Trust for the Medium and Small Entrepreneurs," Sitharaman said.

TReDS is an institutional mechanism to facilitate the trade receivable financing of MSMEs from corporate buyers, through multiple financiers. Highlighting that more than five lakh MSMEs had been permitted from restructuring of debt by RBI in the last year, Nirmala said the restructuring window was to end on March 31, 2020 but the government had asked RBI to consider extending this window till March 31, 2021.

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