• MSME in India

The MSME (Micro, Small, and Medium Enterprises) industry plays a vital role in the economy, contributing significantly to GDP, employment, and inclusive growth. MSMEs are major job providers, especially in developing countries. In India, for instance, MSMEs employ over 110 million people, reducing urban-rural disparity by offering local employment opportunities. MSMEs contribute substantially to the GDP.  They are agile, innovative, and flexible, making them capable of adapting to market needs faster than larger corporations, which fuels economic dynamism.

MSMEs contribute significantly to exports, particularly in sectors like textiles, handicrafts, gems, and agriculture. They also support larger companies by being suppliers and vendors, making them integral to global supply chains. MSMEs play a role in reducing regional economic imbalances by encouraging industries in semi-urban and rural areas. This promotes balanced regional development and helps curb migration to urban areas.

MSMEs act as feeder industries to large corporations, supplying essential components, which supports the broader industrial ecosystem.

Our newsletter is an attemppt to provide brief about the developments in MSME Sector on weekly basis.

  • Our Special Corner
  • “SC ruling empowers MSME promoters to submit resolution plans under IBC

The Supreme Court’s ruling in the case of Hari Babu Thota has significantly empowered MSME promoters by clarifying their eligibility to submit resolution plans under the Insolvency and Bankruptcy Code (IBC).

In a landmark judgment, the Supreme Court has clarified the applicability of Sections 29A and 240A of the Insolvency and Bankruptcy Code (IBC), providing a significant boost to Micro, Small, and Medium Enterprises (MSMEs) facing insolvency.

Key Points from the Ruling:

  • Eligibility: MSME promoters can now submit resolution plans even if the MSME certification was obtained after the commencement of the Corporate Insolvency Resolution Process (CIRP).
  • Assessment Date: The eligibility of MSME promoters will be assessed based on the date of submission of the resolution plan, not the date of the commencement of the CIRP.
  • Purpose: This ruling aims to facilitate the revival of MSMEs and provide them with a greater opportunity to participate in their own resolution process.

This decision aligns with the overarching objective of the IBC to promote corporate revival and maximize the value of assets. By allowing MSME promoters to submit resolution plans, the Supreme Court has taken a significant step towards ensuring that MSMEs have a fair chance to overcome financial distress and continue their operations.

The ruling aligns with the broader goals of economic resilience and growth in India, emphasizing the importance of facilitating business recovery and preserving employment.

  • MSME Schemes:

The government has introduced many schemes to encourage the micro and small industries. Through many schemes, the Central government is boosting the credit availability for the MSMEs. MSME (Micro, Small and Medium Enterprises) schemes are initiatives launched by the Government of India to support and promote the growth and development of small businesses in the country.

  • “Centre to launch collateral-free term loans scheme for MSMEs, says FM Sitharaman”

The government is all set to launch a collateral-free term loans scheme for micro, small and medium enterprises (MSMEs) to boost their manufacturing capabilities, finance minister Nirmala Sitharaman said on Saturday, adding that the scheme will be placed before the Cabinet soon.

Introduction of a new credit guarantee scheme will have to go to the Cabinet “sooner” which will facilitate “term loans” to MSMEs, she said while addressing the industry at the National MSME Cluster Outreach Programme in Bengaluru.

After the success of the working capital loan facility – the Emergency Credit Line Guarantee Scheme (ECLGS) – that saved millions of MSMEs from sinking into the red by providing them liquidity during the Covid period, the government is launching a term-loan facility for them to purchase modern plant and machinery. As on December 2023, ECLGS issued guarantees to over 1.19 crore borrowers involving ₹3.68 lakh crore.

The proposed scheme is part of the five key budget proposals to boost the MSME sector. “This budget provides special attention to MSMEs and manufacturing, particularly labour-intensive manufacturing. We have formulated a package covering financing, regulatory changes and technology support for MSMEs to help them grow and also compete globally, as mentioned in the interim budget,” the FM said while announcing specific measures during her Budget speech on July 23.

The government recently implemented its second MSME-related budget proposal to enhance the limit of Mudra loans for those entrepreneurs who availed and successfully repaid previous loans. Last month, it doubled the maximum limit of the collateral free institutional credit to small businesses to ₹20 lakh for a new category of scrupulous entrepreneurs – ‘Tarun Plus’ — who availed the facility in past and repaid the borrowed sum. The move also raised the categories of Mudra loans beneficiaries from three to four under the Pradhan Mantri Mudra Yojana (PMMY) that was launched by Prime Minister Narendra Modi on April 8, 2015. Source: Click Here

  • “Govt to decide soon on Rs 100 crore credit guarantee scheme for MSMEs: FM”

Union Finance Minister Nirmala Sitharaman on Saturday said that the Rs 100 crore credit guarantee scheme for MSMEs which was announced in the budget this year will soon be placed before the Union Cabinet for approval.

“The Rs 100 crore credit guarantee scheme will soon be placed before the cabinet. Immediately after getting approval from cabinet, the scheme that will provide guarantee through MSME ministry and banks will be implemented,” the Union Finance Minister said, while attending the National MSME Cluster Outreach Programme here.

Further stating that there is no need for a third party guarantee and collateral, Sitharaman said, “the Government gives you the guarantee power of Rs 100 crores, then public sector banks will develop a new credit assessment model.”

Lauding Karnataka for its contribution in the MSME sector, she said, the state has 35 lakh MSMEs, and they provide 1.65 crore employments.

Earlier in the day, Sitharaman also chaired a meeting here to review performance of 10 Regional Rural Banks (RRBs)of the Southern Region, covering the five states of Andhra Pradesh, Karnataka, Kerala, Tamil Nadu and Telangana apart from the Union Territory of Puducherry.

During the meeting, she urged RRBs to increase credit disbursement under various Government of India flagship schemes such as MUDRA, PM Vishwakarma, with the active support of their sponsor banks.

According to an official statement, the meeting focused on business performance, upgrading digital technology services, and fostering business growth in activities allied to agriculture and micro and small industry

The Union Minister also directed RRBs to increase their share in ground level agriculture credit disbursement with special focus on allied agriculture activities like dairy, animal husbandry, fisheries etc, and to take necessary steps to realise the full potential of allied agriculture activities in the region. Source: Click Here

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  • Trade Receivables Discounting System (TReDS) – Part 53

Trade Receivables electronic Discounting System (TReDS) is an online electronic platform and an institutional mechanism for factoring of trade receivables of MSME sellers. It enables discounting of invoices through an auction mechanism to ensure prompt realization of trade receivables.  

The Trade Receivables electronic Discounting System (TReDS) was released by the Reserve Bank of India in 2018 to help small businesses resolve cash flow issues.

Ministry of MSME mandates TReDS Onboarding for Large Companies by March 2025

The Ministry of MSME has recently issued a notification mandating the onboarding of large companies onto the Trade Receivables Discounting System (TReDS) platforms by March 2025. This directive applies to companies registered under the Companies Act, 2013, with a turnover exceeding Rs 250 crore, as well as all Central Public Sector Enterprises (CPSEs).

TReDS is an online platform that facilitates the discounting of trade receivables, thereby improving access to working capital for MSMEs. The mandatory onboarding of large companies aims to promote the adoption of TReDS and further enhance the financial health of MSMEs in India.

Key Points from the Notification:

  • Affected Companies: Companies with a turnover of more than Rs 250 crore and all CPSEs.
  • Platform: TReDS platforms authorized by the Reserve Bank of India (RBI).
  • Deadline: 31st March 2025.
  • Purpose: To facilitate the discounting of trade receivables and improve access to working capital for MSMEs.

By adhering to this mandate, large companies can contribute to the financial empowerment of MSMEs and play a vital role in India’s economic growth.

  • MSME Corporate News:
  1. Nellore Collector urges SIDBI to boost local MSMEs

District Collector O. Anand on Friday urged the Small Industries Development Bank of India (SIDBI) to support local Micro, Small and Medium Enterprises (MSME) to increase their production, considering the three MSME clusters set up in Nellore district are not progressing as expected.

Speaking at the ‘MSME Cluster Outreach Programme’ organised by the SIDBI in the city, he said: “The SIDBI shall provide financial assistance to all the MSMEs under its various schemes, identify better marketing strategies and increase their opportunities, and help the farmers dependent on orange, mango and other horticulture crops in the district to explore domestic as well as international markets.”

SIDBI Hyderabad region general manager Vemuri Chandramouli said that the organisation is encourages lending to MSMEs by refinancing the commercial banks and other financial institutions to grant loans to small scale industries.

Mr. Chandramouli informed that the SIDBI is assisting MSMEs to exhibit their products in international exhibitions as well as bearing the expenses of their participation. He said that seed capital and soft loans are also provided to small scale entrepreneurs to sustain their businesses. (To read more – Click Here)

  • T.N. Government will hold biannual reverse buyer-seller meets to boost exports, says Minister Anbarasan in Coimbatore

The Tamil Nadu Government will conduct reverse buyer-seller meets in major cities every six months, said T.M. Anbarasan, the State’s Minister for MSMEs.

Inaugurating a two-day reverse buyer-seller meet organised by FaMe TN in Coimbatore on Thursday, the Minister announced that a large-scale meet will be held in Chennai next year, with additional meets planned in cities like Tiruchi, Madurai, and Tirunelveli to support MSMEs in accessing international markets. The first such meeting, held in Chennai, saw 164 MSMEs signing agreements for orders worth ₹42.68 crore, including ₹16.45 crore secured by 73 first-time exporters.

The Coimbatore meet on November 7 and 8 saw the participation of 28 buyers from 14 countries, including Japan and Germany, alongside over 250 MSMEs from across the State. Nationally, MSMEs contribute 42% of exports and 30% of domestic manufacturing, with Tamil Nadu’s 28.42 lakh registered MSMEs employing two crore people. Over 5,000 MSMEs signed agreements with the government to invest ₹63,773 crore during the Global Investors Meet, he added. Read more – Click Here

  • Finance ministry asks banks to focus on cybersecurity and accelerating pace of lending to agriculture & MSMEs

Concerned over the growing instances of cyber frauds, the finance ministry on Tuesday asked public sector banks (PSBs) to align their digital and cybersecurity frameworks with industry best practices and ensure customer protection and operational continuity as top priorities. During a review meeting chaired by the Department of Financial Services (DFS) Secretary M Nagaraju, discussions were held on enhancing the robustness of PSBs, building on recent financial achievements, and addressing strategic challenges with key focus on financial performance indicators, assets and liabilities management, cyber resilience, and digital payments infrastructure.

PSBs were asked to continue strengthening their financial and operational frameworks, particularly in light of the evolving market dynamics and cyber security needs, the finance ministry said in a statement.

Recently, Prime Minister Narendra Modi spoke about the cybercrime of ‘digital arrests’, noting that it has hit all sections of society and urging people to adopt the mantra of “stop, think and take action” when faced with such a scam.

The DFS secretary underscored the importance of financial inclusion initiatives of the government and urged PSBs to further intensify their efforts to expand access to various financial services for underserved communities and enterprises.

He advised PSBs to give more thrust on technological advancements, robust financial health, timely and quality redressal of public grievances through responsible banking practices and to continue to make concerted efforts for enhancing customers’ banking experience.

He has contributed in ICAI, ICSI and MCCI and other various Newsletters. He is also a speaker at various platforms including seminars / webinars.