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Budget may give Rs 500 cr each for two MSME funds

The distressed asset fund will also receive a guarantee from the Credit Guarantee Fund Trust for Micro and Small Enterprises, which was set up by the government and Sidbi a few years ago.

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Last Updated: Jan 24, 2020, 11.16 AM IST
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With entrepreneurs often putting their entire savings into running an MSME unit, they often find it tough to raise more resources when the business faces financial problems.
(This story originally appeared in on Jan 24, 2020)
NEW DELHI: The government is expected to provide around Rs 500 crore each for two funds for micro, small and medium enterprises (MSMEs). While a Rs 10,000-crore fund of funds is proposed to support private equity and venture capital fund for MSMEs, a Rs 5,000-crore fund to deal with distressed assets is also on the anvil.

Both the funds had been proposed by a committee appointed by the Reserve Bank of India, which was headed by former Sebi chairman U K Sinha. The remaining funds are expected to be provided by the government in tranches.

Unlike the past when Sidbi was tasked with managing funds related to MSMEs, this time the fund of funds is expected to be handled by SBI Caps, while the distressed assets fund is expected to be run by a new entity that the government is expected to set up to deal with other issues, including viability gap funding, sources said.

The distressed asset fund will also receive a guarantee from the Credit Guarantee Fund Trust for Micro and Small Enterprises, which was set up by the government and Sidbi a few years ago. “The structure has been worked out and is expected to help tackle the financial stress that the sector has been facing in recent years.”

In fact, at a recent meeting of the Cabinet Committee on Investment and Growth, the issue of distress in the MSME sector was discussed and a special window was also discussed. While the distressed asset fund will help address some of the concerns of the viable units, banks have also proposed that the government put in place a special mechanism under the Insolvency and Bankruptcy Code to deal with the sector.

With entrepreneurs often putting their entire savings into running an MSME unit, they often find it tough to raise more resources when the business faces financial problems.
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