The Centre on Friday notified a framework for revival and rehabilitation of Micro, Small and Medium Enterprises (MSMEs), which mandates banks to form a panel to chalk out a corrective action plan to be adopted for units having stressed accounts.
“It is expected that above Framework help the lenders and debtors in revival and rehabilitation of enterprises and shall unlock the potential of MSMEs,” the Ministry said.
The salient features of the framework are identification of incipient stress; formation of committees for distressed MSMEs; and a Corrective Action Plan by the Committee.
“Pending a detailed revision of the legal framework for resolving insolvency/bankruptcy, there is a felt need for special dispensation for revival and exit of MSMEs.
“The MSMEs facing insolvency/bankruptcy need to be provided legal opportunities to revive their units. This could be through a scheme for re-organisation and rehabilitation, which balances the interests of the creditors and debtors,” the Ministry said.
Under the framework, before a loan account of an MSME turns into a non-performing asset (NPA), banks/creditors are required to identify incipient stress in the account. Any MSME may also voluntarily initiate proceedings if enterprise reasonably apprehends failure of its business or its inability or likely inability to pay debts and before the accumulated losses of the enterprise equals to half or more of its entire net worth. Under the Corrective Action Plan, the Committee may explore various options to resolve the stress in the account.
