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The Finance Ministry has appointed a 15-member committee under the Chairmanship of ICICI Bank Chairman K V Kamath to examine the financial architecture for 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 MSME from the low levels seen currently.
Besides 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 Department of Financial Services move 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 a comparitive study of the financial architecture in other developed and emerging economies for strong support to MSMEs.
Meanwhile, the Action Committee For Formal Finance For Non Corporate Small Business has hailed the formation of Committee on Financial Architecture for MSME sector by the Finance Ministry.
Praveen Khandelwal, National Coordinator of the Action Committee said that it is a landmark initiative any government has taken so far.
The informal sector is under served as far as financial assistance is concerned and commercial banking has failed to provide requisite finances to this sector.
Only 4 per cent of non corporate sector could able to avail finances from the Government.
The general perception in banking sector is to largely avoid financing informal sector, according to Khandelwal.
Therefore, there is an urgent need of a separate and viable financial architecture for informal sector and government has finally given importance to this sector, he said.
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