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The Finance Ministry has appointed a 15-member committee under the Chairmanship of ICICI Bank Chairman KV Kamath to examine the financial architecture for the micro, small and medium enterprises (MSME) sector.
The committee will, among other things, come up with concrete suggestions to improve the share of institutional finance to MSMEs.
This Panel has been asked to submit its final report in three months.
Role of fundsBesides looking at innovative financial products for MSMEs, the committee will suggest measures to increase the flow of equity support to MSMEs by targeting incubator-based funds, angel/seed funds, impact funds and venture capital/private equity funds.
It will also look at regional disparities in credit flow to MSMEs.
The move of the Department of Financial Services to set up this committee comes two-and-a-half months after Finance Minister Arun Jaitley announced in his maiden Budget speech that a committee will be set up to examine the financial architecture for the MSME sector.
The terms of reference of the committee include assessing the current structure of flow of finance to MSME sector – delivery channels, products and services and policy environment.
The committee will also undertake comparison with financial architecture in other developed and emerging economies for strong support to MSMEs.
This panel has also been asked to suggest measures to substantially improve India’s position in ease of starting business and ease of doing business indices by analysing gap areas in the role and scope of financial intermediaries and financial products and services.
The 15-member panel includes Sushil Muhnot, Chairman and Managing Director of Bank of Maharashtra, R Vaidyanathan, Professor, IIM Bangalore, Saurabh Srivastava, Founder, India Angel Network, Rajni Bector, founder of Cremica Foods, and Nilesh Shah, CEO of Axis Capital.
Meanwhile, the Action Committee for Formal Finance for Non-Corporate Small Business has hailed the formation of this committee. Praveen Khandelwal, National Coordinator of the Action Committee, said it is a landmark initiative any Government has taken so far.
Informal sectorThe informal sector is underserved as far as financial assistance is concerned and commercial banking has failed to provide the requisite finances.
Only four per cent of the non-corporate sector could avail itself of finances from the Government.
The general perception in the banking sector is to largely avoid financing the informal sector, according to Khandelwal.
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