The RBI last week came up with a revised framework for revival and rehabilitation of MSMEs. The new guidelines, which follow a May 2015 notification, are applicable to MSMEs having loan limits up to Rs. 25 crore. The central bank directs PSU banks to look for stressed accounts from an early stage by creating three sub–categories and forward such accounts to a committee – comprising of bankers, MSME loans in–charge and outside experts – that will, in turn, have to come up with a corrective action plan, which shall look at rectification, restructuring, recovery and additional finance if needed. The idea sounds good but will it be workable in practice?

According to a recent media report, less than 5 percent of potentially viable units in the MSME sector were revived during the past decade. This data is shocking, particularly at a time when newspaper headlines have been full of stories of bad loans worth thousands of crores of rupees taken by large corporates. The report adds that banks show reluctance to offer greening or corporate debt restructuring (CDR) facility to MSMEs. No real effort is given to restructure or revive even viable advances only because they are backed by collateral. If things are really going like this, then we will never be able to rehabilitate our sick MSMEs. The central bank must ensure that its efforts trickle down to the branch level.

Meanwhile, the Insolvency and Bankruptcy Code Bill has been referred to a joint committee of parliament. The proposed legislation seeks to bring down the time required to resolve insolvency cases to 180 days, extendable by another 90 days, from current four years. This is a major pieces of reform legislation, which, I hope, would be passed during the Budget session. There are some other positive developments, which I think are encouraging. First, it was announced that Khadi and Village Industries Commission would soon come out with sops for start-ups in the MSME segment. In addition, it is good to see that Udyog Aadhar registration for MSMEs has been going on in full swing, with nearly 3.8 lakh UAMs registering since introduction of this facility in October last year.

The recent Directorate General of Safeguards (DGS) decision to extend 'safeguard duty' on some steel products up to March 2018 is not welcomed by the sector, however. Many MSMEs have raised their concern over this decision. The duty had been first introduced in September 2015, for 200 days, based on complaints logged by some steel majors, but now its further extension – MSMEs feel – will severely affect the units in the manufacturing segment. This is a Catch-22 situation – we need to safeguard the domestic steel industry from cheaper imports, but at the same time we must ensure that our MSMEs – which together create millions of jobs – do not suffer. We need to strike the right balance.

I invite your opinions.