Framework for Revival and Rehabilitation of MSMEs



Framework for Revival and Rehabilitation of MSMEs
The Ministry of Micro, Small & Medium Enterprises has notified a Framework for Revival and Rehabilitation of MSMEs, in exercise of the powers conferred under section 9 of the Micro, Small and Medium Enterprises Development Act, 2006.  


In India, the existing mechanism for addressing revival, rehabilitation and exit of small enterprises is very weak. The most recent Doing Business (DB) Report, a joint project of the World Bank and the International Finance Corporation, ranks India 137 out of the 189 economies for resolving insolvencies. It notes that resolving insolvency takes 4.3 years on average and costs 9.0% of the debtor’s estate, with the most likely outcome being that the company will be sold as piecemeal sale.
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-organization and rehabilitation, which balances the interests of the creditors and debtors.
Salient Features
The main features of the framework which complements to the features of the existing RBI notification of 2012 and 2014 are as below:
Identification of incipient stress:  Before a loan account of a MSME turns into a Non Performing Asset (NPA), banks/creditors are required to identify incipient stress in the account. Any Micro, Small or Medium enterprise may also voluntarily initiate proceedings under this Order 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.
Committees for Distressed Micro, Small and Medium Enterprises: All banks shall constitute one or more Committees at such locations as may be considered necessary by the board of directors of such bank to provide reasonable access to all eligible Micro, Small and Medium enterprises which have availed credit facilities from such bank. The Committee shall comprise of representatives of the Bank, independent expert and representative of the State Government.
Corrective Action Plan (CAP) by the Committee: The Committee may explore various options to resolve the stress in the account. The intention is to arrive at an early and feasible solution to preserve the economic value of the underlying assets as well as the lenders’ loans and also to allow the enterprise to continue with its business. During the period of operation of Corrective Action Plan (CAP), the enterprise shall be allowed to avail both secured and unsecured credit for its business operations.
Options under Corrective Action Plan (CAP): The options under Corrective Action Plan (CAP) by the Committee may include: (i) Rectification - regularize the account so that the account does not slip into the non-performing asset (NPA) category, (ii) restructuring the account if it is prima facie viable and the borrower is not a willful defaulter, and (iii) recovery - Once the first two options at (i) and (ii) above are seen as not feasible, due recovery process may be resorted to.
Restructuring Process: If the Committee decides restructuring of the account as CAP, it will have the option of either referring the account to Enterprise Debt Restructuring (EDR) Cell after a decision to restructure is taken or restructure the same independent of the EDR mechanism. If the Committee decides to restructure an account independent of the EDR mechanism, the Committee should carry out the detailed Techno-Economic Viability (TEV) study, and if found viable, finalise the restructuring package within 30 days from the date of signing off the final CAP.
Prudential Norms on Asset Classification and Provisioning: While a restructuring proposal is under consideration by the Committee/EDR, the usual asset classification norm would continue to apply. The process of re-classification of an asset should not stop merely because restructuring proposal is under consideration by the Committee/EDR.  However, as an incentive for quick implementation of a restructuring package, the special asset classification benefit on restructuring of accounts as per extant instructions would be available for accounts undertaken for restructuring under these guidelines.
Willful Defaulters and Non-Cooperative Borrowers: Banks are required to strictly adhere to the guidelines issued by RBI from time to time regarding treatment of Willful Defaulters.
Review: In case the Committee decides that  recovery  action  is  to  be  initiated  against  an  enterprise,   such enterprise may request for a review of the decision by the Committee within a period of fifteen working  days from the date of receipt of the decision of the Committee. Application filed under this section shall be decided by the Committee within a period of thirty days from the date of filing and if as a consequence of such review, the Committee decides to pursue a fresh corrective action plan for revival of the enterprise shall apply accordingly.
It is expected that above Framework help the lenders and debtors in revival and rehabilitation of enterprises and shall unlock the potential of MSMEs.
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Indian Air Force Relief and Rehabilitation Phase in Nepal 

Continuing the efforts by the IAF to help Nepal which was struck by severe earthquakes on 25 April 2015 and again on 12 May 2015, relief and rehabilitation is being provided to the people in distress across Nepal including remote and inaccessible areas.  The details of operations carried out so far are as under:-

Type of Aircraft
No. of Sorties Carried Out
No. of Persons Evacuated
No. of Casualties Evacuated
Total Tons of Weight Carried
No. of Persons De-Inducted
IL 76
36
--
--
196.90
1452+07 Mortal Remains+02 Lying patients
C-130J
21
--
--
67.70
532
C-17
36
--
--
344.70
1952+11 Lying Patients+ 07 Sitting Patients
AN-32
12
--
--
06.00
135
MI-17+
MI-17 V5
1449
4869
754
677.135
--
Total
1554
4869
754
1292.435
4071+ 07 Mortal Remains + 13 Lying Patients +       07 Sitting Patients

On 28 May 2015, 28 sorties were carried out by helicopters evacuating 67 people to safer places and 01 casualty. The load carried by these helicopters on 29 May 2015 was 18.95 tons.  02 sorties of C-17 Globe Master III were flown to Kathmandu and back carrying 31.00 tons of load.


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Union Ministers Smt. Smriti Irani, Shri Piyush Goyal & Smt. Nirmala Sitharaman to Participate in Talkathon Tomorrow

Ministers to interact directly with netizens through Twitter using #AskYourGovt @MIB_India

Live answers on I&B YouTube Channel 
As part of its initiative to highlight the achievements of the Government in the last one year, the Ministry of Information and Broadcasting is organizing “Talkathon”. In the first of its kind, the Talkathon platform would involve the participation of three Union Ministers simultaneously. Minister for Human Resource Development, Smt. Smriti Zubin Irani, Union Minister of State (I/C) for Power, Coal, New and Renewable Energy, Shri Piyush Goyal and Union Minister of State (I/C) for Commerce and Industry, Smt.Nirmala Sitharaman will be participating on the Talkathon platform together. The Talkathon programme is scheduled to be held for a duration of 90 minutes tomorrow i.e. 30th May, 2015 from 6 PM onwards. The program would be live from National Media Centre, New Delhi.
Talkathon is an initiative by the New Media Wing of Ministry of Information and Broadcasting which connects the virtual space with physical world. Under the platform, participants in the social media space can post questions on Twitter which would be answered by the guests in real-time. The users may use the hashtag #AskYourGovt to post their queries to the Twitter handle of the Ministry @MIB_India. The speakers/experts shall reply to the queries posted on Twitter, in real time. The event would be webcastedLIVE on YouTube channel of the Ministry (www.youtube.com/inbministry), pib.nic.in, india.gov.in,www.youtube.com/DDNewsofficial  and DD News.
This is the third edition of the Talkathon. It was introduced at International Film Festival of India, 2014 followed by Talkathonwith Railway Minister Shri Suresh Prabhu post Rail Budget.The last edition of the Talkathon was with Minister for Finance, Corporate Affairs and I&B, Shri Arun Jaitley soon after he presented the Budget on February 28, 2015. The latter was especially successful with the hashtag #AskFM trending at Number 1 on Twitter. The current edition of Talkathon is a collaborative effort of the New Media Wing, Press Information Bureau and Doordarshan News under the aegis of I&B Ministry.



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United Nations Peacekeeping Day-29 May 

Centre for United Nations Peacekeeping (CUNPK) celebrated the UN Peacekeeping Day on 29 May 2015 at the Manekshaw Centre in Delhi Cantt. Lt Gen Philip Campose, the Vice Chief of Army Staff was the Chief Guest at the function. The event is part of the worldwide celebrations undertaken on the day to commemorate all brave men and women who have contributed towards establishing peace and security in the war torn countries and ravaged societies across the world. 

The officials acknowledged the contribution of the Indian Armed Forces in about 50 peacekeeping missions across the world and remembered all those valiant soldiers who laid down their life in the line of duty at a place away from their homeland. The event was marked by a seminar on issues pertaining to peacekeeping and its Challenges in Today’s Dynamically Changing World. Various dignitaries including Lt Gen I S Singha, Lt Gen Satish Nambiar (Retd), Lt Gen RK Mehta (Retd), Ms Rebecca Tavares from UN Women and Mr Munu Mahawar , JS (UNP) Division were also present on the occasion. 

Speaking at the occasion, Lt Gen Philip Campose said that the entire peacekeepers’ fraternity had a singularity of purpose that was aimed at ensuring international peace and security. He further said that nature of conflicts was changing at a rapid pace and everyone had to evolve, adjust and modify to suit the requirements of such complexities of time and space. He also applauded the efforts of CUNPK in this direction and commended its efforts for training officers of Indian and foreign diasporas. 

Earlier, the Secretary General’s address was read out to the gathering by Mrs Kiran Mehra Kerpelman, Director, United Nations Information Center, New Delhi. The Address of Mrs Sushma Swaraj, Hon’ble Minister of External Affairs, Govt of India, was also read by Shri Munu Mahawar, JS (UNP) of MEA. 

India began its tryst with UN Peacekeeping by providing the Custodian Force in Korea, 1950. It is worth mentioning that the Indian Army is among the top three contributors to UN Missions. 

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GS Reddy Appointed Scientific Advisor to Raksha Mantri S Christopher Appointed the New DG, DRDO 

The Government has appointed Dr GS Reddy, Distinguished Scientist & Director, Research Centre Imarat (RCI) & Programme Director, MRSAM, DRDO as Scientific Advisor to Raksha Mantri for a period of two years from the date of taking over charge. The Government also appointed Dr S Christopher, Distinguished Scientist & Programme Director (AEW&C) and Director, Centre for Air-Borne Systems, DRDO as Secretary, Department of Defence Research and Development-cum-Director General, DRDO for period of two years from the date of taking over charge. 

Dr G Satheesh Reddy: A profile 

Dr G Satheesh Reddy is one of the renowned experts in Navigation and Avionics technologies. He joined DRDO in 1986 and led the Conceptualization, Design, Development and productionisation of Inertial Sensors, Navigation schemes, Algorithms & Systems, Calibration methodologies, Sensor Models, Simulation along with development of Satellite Navigation Receivers and Hybrid Navigation Systems. Under his leadership, advanced products and varieties of Avionics systems have been produced and successfully flight tested in strategic programmes of the country. As Project Director, Dr Reddy led the design and development of Ring Laser Gyro based INS System, MEMS based INS System, Sea-Guard Reference System and Ship Navigation system strengthening the country’s self-reliance in high accuracy and long range navigation and also successfully developed a 1000 kg class guided bomb. 

As Director RCI, he led the development of Avionics technologies in critical areas of Inertial Systems, Embedded Computers, Control, Real Time Software and Simulation, Power Supplies, RPF, Seekers, Antennae, Flight Instrumentation for various Defence programme - Agni A1, A2, A3, A4, A5, Prithvi, Dhanush, Astra, Akash, underwater missiles, BrahMos, Nirbhay, Helina, Nag, MRSAM, Programme AD - PDV interceptor, Two stage Ship Launched Target, AAD and other defence programmes. Dr Reddy spearheaded a number of Technology Development, Mission Mode, S&T projects delivering variety of Systems to multiple Projects in different capacities. He led the development and production of GPS+GLONASS+GAGAN on Module (G3OM) receiver and System on Chip (SoC) bringing in quantum jump in miniaturization of Onboard Avionics. He also led the development of IIR Seeker for anti tank and long range BMD applications and played a crucial role in development of high accuracy accelerometers for the long range precision Navigation. 

Dr Reddy graduated in Electronics and Communication Engineering from JNTU, Anantapur and received his MS & Doctorate from JNTU, Hyderabad. He is a Fellow of various Academies and Institutes like the Indian National Academy of Engineering, Royal Institute of Navigation London, Royal Aeronautical Society London and a Senior Member of many other professional/scientific bodies in the country and abroad. He has been awarded Full Member Diploma and inducted as a Foreign Member of the Academy of Navigation & Motion Control, Russia and is an Associate Fellow of American Institute of Aeronautics & Astronautics, USA (AFAIAA). In recognition of his distinguished contributions, Computer Society of India conferred on him the Honorary Fellowship (HFCSI). He is also an Honorary Member of ACDOS and a national member of IFAC Austria. 

Dr Reddy is a recipient of several prestigious awards which includes the Indian Science Congress Association Homi J. Bhabha Memorial Award, DRDO Young Scientist Award, Agni Award for Excellence in Self Reliance, DRDO Scientist of the Year Award etc. He is a Member of the Governing Council/Academic Senate of reputed academic institutes. 

Dr S Christopher: A profile 

Dr Christopher obtained his BE (Hons) in Electronics & Communication Engineering from University of Madras and M.Tech. in Microwaves and Radar Engineering from IIT, Kharagpur. He joined IIT, Madras, as Project Associate and carried out research in Microwave Antenna Design and Near-field Measurement Techniques. He obtained PhD in Antennae and Measurement Techniques from IIT, Madras. 

Dr Christopher worked for M/s Bharat Electronics, Ghaziabad, as Senior Engineer and later joined LRDE as Scientist-‘D’ and rose to Scientist ‘G’. He led a team to create the Automated Planar near Field Measurement Facility at LRDE for the first time in the country. He was Project Director for LCA MMR and led the team for designing and developing slotted array technology, which was used for several airborne and missile projects including export to Poland. He was also Project Director for ASP project and also for development of the Maritime Patrol Airborne Radar, Super Vision 2000, for the Indian Navy. 

Dr Christopher joined the Centre for Air-Borne Systems (CABS) in 2004 and assumed charge as Programme Director for the Airborne Early Warning and Control (AEW&C) programme. He was appointed Director, CABS, in addition to his responsibility as Programme Director (AEW&C). He was elevated to the rank of Distinguished Scientist in 2012. 

Dr Christopher is a Fellow of the National Academy of Engineers (FNAE), Aeronautical Society of India (AeSI) and the Institution of Electronics & Telecommunication Engineers (IETE). He is a member of SEE, IEEE and is a recipient of many awards including scientist of the year award in 1998. 

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Anant Geete Inaugurates DHI-FICCI Workshop on “Technology Development for Capital Goods: Constraints & the way Forward” 

Urges Industry to make use of Capital Goods Scheme to Bridge Technology Gaps & Acquire Technologies 

Valued at Rs 1000 Crore the DHI Capital Goods Scheme to Promote Make in India Initiative of Government of India 

Union Minister for Heavy Industries & Public Enterprises Shri Anant Geete, Union Minister for Heavy Industries & Public Enterprises has urged the industry to come forward and make use of the Capital Goods Scheme notified by Department of Heavy Industries (DHI), Government of India to bridge the technology gaps in the sector. Shri Geete was inaugurating a DHI-FICCI Workshop on “Technology Development for Capital Goods: Constraints & the Way Forward” in Ahmedabad today urged the industry to come forward and make use of the Capital Goods Scheme notified by Department of Heavy Industries (DHI), Government of India to bridge the technology gaps in the sector. 

Shri Geete said this scheme launched under the Make in India initiative of Government of India provides support to the industry to acquire technology, set-up technology development centres in collaboration with Institutes, and create common infrastructure for the capital goods industry and is is valued at Rs 1000 crore and Government of India is contributing around Rs six hundred odd crore for the Scheme for the next four years. 

This is the first scheme launched by an economic Ministry of Government of India facilitating collaboration between industry and academia and as a fulfillment of the objective of Make in India. 

In capital goods sector, the technology gap is widening when compared to other countries. Dependence on high-end technology capital goods is increasing in the country and upgradation of technology levels, continuous R & D efforts and self sufficiency of the nation in this sector requires desired levels of investment and support by the Government. Under these circumstances, this scheme of the DHI will help the industry in acquiring technologies from abroad or to develop such technologies within the country with the support of an institute, the minister added. 

Shri Geete said “While there are some players who have technological competencies, especially in design capability, application innovation and process innovation, the technological capabilities of large number of players, especially in the SME sector, are limited. India has become one of the largest importers of capital goods in the world importing around US $ 20 billion of CG imports per year. This has adversely affected the indigenous capital goods industry”. 

Shri Geete also said that his Government was working with countries like Germany, USA etc to liberalise the exports of dual use technologies that would benefit the capital goods sector. Transfer of technology from other developed countries has not been significant despite liberalization of policies for technology transfer and foreign direct investments. Constraints imposed by developed countries on dual use items exports have restricted the technology development in our country. 

A unique component of the Scheme is Technology Acquisition Fund where Government is giving support upto 25% of the cost of technology subject to the limit of Rs. 10 crore. 

The scheme would particularly be helpful for the industry in Gujarat as lot of capital goods industry and components producers are present in the State in sectors like textiles machinery, plastic machinery, machine tools, process plant and engineering. The engineering clusters of Gujarat can take advantage of this scheme to achieve next levels of the technology. 

On this occasion, Shri M.S. Unnikrishnan, Co-chairman, FICCI Capital Goods Committee & Managing Director & CEO, Thermax Limited said “This scheme of the DHI was indeed the need of the hour for capital goods sector. The scheme has rightly focused on the technology development besides other aspects”. 

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Ministry of HRD Committed to Flagship Schemes of School Education Including Mid Day Meal Scheme 

The Government of India is committed to the Flagship schemes of School Education including the Mid-Day Meal Scheme and the Ministry of Human Resource Development would like to present the correct picture against various media reports which are reporting budgetary cuts in the scheme. The Mid-Day Meal programme covers about 10.33 crore children studying in elementary schools in the government, government-aided schools and special training centres for mainstreaming the out of school children. The MDM programme is being administered in all the States and Union Territories of the country on an agreed funding pattern. Moreover, there has been significant increase in devolution of central revenues to the States under the 14th Finance Commission, whereby 42% of the revenues are being devolved to the States as against 32% earlier. Furthermore, the budget estimate for the MDM programme has been made at the level of Rs.9236 crores for 2015-16. It is likely to be increased at the supplementary stage in case of further requirements. The Government of India has, in fact, issued improved guidelines for quality control and safety in the MDM programme to all States and UTs so as to enhance the implementation of the programme. Good practices among State Governments have also been shared across the country including the practice of Tithi Bhojan to enhance the local community participation in the scheme which have enthused many States to improve the administrative support for the MDM programme. The Central Government has in fact enhanced outlays for States affected by drought for which an additional Rs.466.70 crores has been approved under the MDM scheme to provide children at the elementary school level, with a mid day meal during the current summer vacations, as well. 

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Ministry of HRD Statement on IIT Madras Matter 

A news item regarding action taken by IIT, Madras against the Students Group, viz., Ambedkar-Periyar Study Circle, has appeared in some newspapers.

The action has been taken by IIT, Madras as per the guidelines of the Institute, Ministry of Human Resource Development had nothing to do with this except for forwarding the complaint received to Director, IIT, Madras for comments. IIT, Madras has taken action as per their own procedure and Institute’s guidelines. IITs being autonomous institutions, they are competent to handle matters within their guidelines and procedure. The matter has been clarified by IIT, Madras through a media statement dated May 29th, 2015.


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Framework for Revival and Rehabilitation of MSMEs 

The Ministry of Micro, Small & Medium Enterprises has notified a Framework for Revival and Rehabilitation of MSMEs, in exercise of the powers conferred under section 9 of the Micro, Small and Medium Enterprises Development Act, 2006.  

In India, the existing mechanism for addressing revival, rehabilitation and exit of small enterprises is very weak. The most recent Doing Business (DB) Report, a joint project of the World Bank and the International Finance Corporation, ranks India 137 out of the 189 economies for resolving insolvencies. It notes that resolving insolvency takes 4.3 years on average and costs 9.0% of the debtor’s estate, with the most likely outcome being that the company will be sold as piecemeal sale.

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-organization and rehabilitation, which balances the interests of the creditors and debtors.

Salient Features

The main features of the framework which complements to the features of the existing RBI notification of 2012 and 2014 are as below:

Identification of incipient stress:  Before a loan account of a MSME turns into a Non Performing Asset (NPA), banks/creditors are required to identify incipient stress in the account. Any Micro, Small or Medium enterprise may also voluntarily initiate proceedings under this Order 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.

Committees for Distressed Micro, Small and Medium Enterprises: All banks shall constitute one or more Committees at such locations as may be considered necessary by the board of directors of such bank to provide reasonable access to all eligible Micro, Small and Medium enterprises which have availed credit facilities from such bank. The Committee shall comprise of representatives of the Bank, independent expert and representative of the State Government.

Corrective Action Plan (CAP) by the Committee: The Committee may explore various options to resolve the stress in the account. The intention is to arrive at an early and feasible solution to preserve the economic value of the underlying assets as well as the lenders’ loans and also to allow the enterprise to continue with its business. During the period of operation of Corrective Action Plan (CAP), the enterprise shall be allowed to avail both secured and unsecured credit for its business operations.

Options under Corrective Action Plan (CAP): The options under Corrective Action Plan (CAP) by the Committee may include: (i) Rectification - regularize the account so that the account does not slip into the non-performing asset (NPA) category, (ii) restructuring the account if it is prima facie viable and the borrower is not a willful defaulter, and (iii) recovery - Once the first two options at (i) and (ii) above are seen as not feasible, due recovery process may be resorted to.

Restructuring Process: If the Committee decides restructuring of the account as CAP, it will have the option of either referring the account to Enterprise Debt Restructuring (EDR) Cell after a decision to restructure is taken or restructure the same independent of the EDR mechanism. If the Committee decides to restructure an account independent of the EDR mechanism, the Committee should carry out the detailed Techno-Economic Viability (TEV) study, and if found viable, finalise the restructuring package within 30 days from the date of signing off the final CAP.

Prudential Norms on Asset Classification and Provisioning: While a restructuring proposal is under consideration by the Committee/EDR, the usual asset classification norm would continue to apply. The process of re-classification of an asset should not stop merely because restructuring proposal is under consideration by the Committee/EDR.  However, as an incentive for quick implementation of a restructuring package, the special asset classification benefit on restructuring of accounts as per extant instructions would be available for accounts undertaken for restructuring under these guidelines.

Willful Defaulters and Non-Cooperative Borrowers: Banks are required to strictly adhere to the guidelines issued by RBI from time to time regarding treatment of Willful Defaulters.

Review: In case the Committee decides that  recovery  action  is  to  be  initiated  against  an  enterprise,   such enterprise may request for a review of the decision by the Committee within a period of fifteen working  days from the date of receipt of the decision of the Committee. Application filed under this section shall be decided by the Committee within a period of thirty days from the date of filing and if as a consequence of such review, the Committee decides to pursue a fresh corrective action plan for revival of the enterprise shall apply accordingly.

It is expected that above Framework help the lenders and debtors in revival and rehabilitation of enterprises and shall unlock the potential of MSMEs.

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Framework for Revival and Rehabilitation of MSMEs Framework for Revival and Rehabilitation of MSMEs Reviewed by Ajit Kumar on 3:32 PM Rating: 5

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