- A Reserve Bank of India(RBI) expert committee tasked with reviewing the current framework for the micro,small and medium enterprises (MSMEs) has submitted its report.
- The committee has recommended a ₹5,000 crore distressed asset fund for micro,small and medium enterprises (MSMEs).
- The fund will assist units in a cluster where there is a change in the external environment such as plastic ban which had resulted in large numbers of such entities becoming non-performing.
- The panel has recommended doubling the cap on collateral-free loans to Rs 20 lakh from the current Rs 10 lakh.This will be extended to borrowers falling under the Mudra scheme,self-help groups and MSMEs.
- A collateral free loan means that borrowers do not have to offer any asset or pledge collateral to borrow against.
- The committee has also recommended that banks which wish to specialise in MSME lending,their targets for farm loans under the priority sector lender could be waived off and instead can be given a target for loans to the SME sector.
- The targets could be of 50% of the net bank credit for universal banks and 80% for small finance banks.At present,the overall priority sector lending target for a universal bank is 40% of their net bank credit and 75% for small finance bank.
- The committee has also recommended a government-sponsored fund of funds(FoF) of Rs 10,000 crore.The FoF will be meant to support venture capital (VC) and private equity(PE) firms investing in the MSME sector.
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