Government readies plan for speedy issue of payments to MSMEs

In recent years, MSMEs have been facing a liquidity crunch, owing to factors like GST and demonetisation. But the problem of delay in payments from clients that include many state and centre run enterprises, has been a long and a recurring problem.

In a move to provide MSMEs immediate relief, the government plans to launch a system in November allowing banks to release 90 percent of the MSMEs’ payments, solely on the basis of receipts of purchase issued to state and centre run public enterprises, which buy from MSMEs.

Further, to ensure a speedy process, the plan will be implemented in a decentralised manner, enabling even mid-level management of banks to release payments.

Experts say that owing to the delay in payments, many MSMEs have been turned into non-performing assets. The move is expected to curb the liquidity problem of MSMEs to some extent, which had aggravated after demonetisation and GST.

Also, given MSME’s contribution to the Indian economy -- 30 percent to GDP, 49 percent to exports, and the largest employer after agriculture -- the government is aware that ignoring its problems could cost it dearly in the upcoming general elections.