Union Budget 2021: MSMEs Seek Short-Term Suspension Of Basel Norms, Prompt Payments

Edited by Nikita Prasad

01 Feb 2021, 09:25 AM IST

Budget 2021: Budget 2021 is significant as it will be presented amid the COVID-19 crisis

Budget 2021: The Indian Chamber of Commerce (ICC) suggested earlier that a two percent interest subvention scheme for micro, small and medium enterprises (MSMEs) on loans must be extended with enhanced coverage of three-four per cent to the extent of ₹ 300 lakh, in the upcoming budget. The two percent interest subvention scheme for the micro, small and medium enterprises on loans was extended till March 31 with some business-friendly provisions. The coverage of the scheme is limited to all term loans and working capital to the extent of ₹ 100 lakh, which the Indian Chamber of Commerce expects to be extended to ₹ 300 lakh. (Also Read: Budget 2021: Interest Subvention Scheme For MSMEs Must Be Extended, Says Industry Body )

Industry leaders and analysts have come up with a few more expectations that they seek from Budget 2021 for the micro, small and medium enterprises sector. Mr. Neeraj Dubey, Partner, Corporate Law, Singh & Associates, a full-service law firm, explains that stimulating access to finance for non-banking financial companies (NBFCs) and FinTech firms will provide a boost for the MSME sector.

Mr Dubey suggests that targeted schemes should be designed with a job creator focus. Bringing greater focus to nano and mass enterprises and expanding deployment channels to include NBFCs, and FinTech firms that work with these segments will create jobs efficiently. He added that facilitating prompt payment systems will also help MSMEs.

The large corporates make a ‘prompt payment pledge', an ethical commitment to pay their MSE suppliers in accordance with the The Micro, Small and Medium Enterprises Development Act, 2006. Section 15 of the MSMED Act talks about the liability of the buyer, provided that the period agreed between the parties shall not exceed 45 days from the day of acceptance or deemed acceptance of goods or services. This will create a movement around ‘prompt payments' and encourage corporate boards to track payment efficiency.

Lastly, Mr. Neeraj Dubey expects short-term suspension of basel norms. He explains that the MSME body Federation of Indian Micro and Small & Medium Enterprises, which represents 740 MSME associations involving 20 lakh members, in the country, has sought a short-term suspension of basel norms on the banking sector to ease lending. The suspension has been sought to permit the needed flexibility amongst banks essential to assistance COVID-hit MSMEs.