Labour welfare and Growth of SMEs
Practices relating to working conditions, safety and health, skills development contribute positively to the welfare of SMEs in India.
May Day is celebrated in most part of the world as a symbol of creating awareness about better labour practices in the workplaces. It is an appropriate time to understand the firms’ labour resources and capabilities, and contributions, as do external interactions – i.e. the diverse market and regulatory/ institutional contexts that condition competitive advantage and survival for SMEs.Read more
Diversification strategy for SMEs: Better the research lesser the risk
Diversification into newer areas is good for entrepreneurs. However thorough research is needed to mitigate the risk in the new venture.
Last week I met an entrepreneur who had been running an oil business for more than two decades. Recently he took a decision to diversify the business in order to ensure sustainable cash flow and derisk himself from the industry related challenges because the oil extraction industry is undergoing a steady transformation towards brand orientation and it requires a larger capacity.Read more
Amendments to IBC 2016- A comfort to SMEs under distress
Proposed amendments to allow the promoters to become part of the resolution of stressed business will support quick revival MSMEs under the new law.
Recently Govt has formed a committee under Secretary of Corporate Affairs to review certain provisions of Insolvency and Bankruptcy code 2016. The review panel called for sweeping changes in the law aimed at easing insolvency rules for small enterprises and providing relief to home buyers by treating them as financial creditors while deeming the amount raised from them for real estate projects as financial debt.Read more
Framework for Revival and Rehabilitation of MSMEs- An early stage support for SMEs showing signs of stress.
MSME framework creates breathing space for entrepreneurs who may be experiencing symptoms of distress in the business due to various internal and external reasons.
Recently I interacted with an entrepreneur who intended to acquire an ailing power equipment servicing business. The subject company has become an NPA in the bank recently. The company had slipped into distress mainly due to problems associated with power sector as power distribution companies were not placing the orders for servicing due to their own poor financial profile.Read more
Bank Scam: Impact on lending to MSMEs in India
Rs 13000 crores PNB scam is causing systemic damage to lending to businesses and it is feared that MSMEs may suffer the most.
Punjab National Bank(PNB) scam of Rs 13000 is still occupying centre stage of debate in political level and media leading to the prevalence of negative perception about the functioning of public sector banks(PSBs).Read more
Risk Management: An invisible act against harms for SMEs
Risk management plays a unique role in protecting and sustaining the business yet does not figure in performance metrics. It is invaluable to survive as going concern for SMEs.
Recently we all heard tragic event in Mumbai wherein 15 died in the fire incident in a bar. Upon investigating, it was found that fire safety measures were not in use and escape routes were not available in an emergency. The police have booked the case against owners of pub and owners are put behind bars. Sadly the owners who do not have any criminal record nor had any intention to do so, have to face criminal proceedings for culpable homicide. Upon analysis, one can find that they have not given enough attention to key risks and their mitigation in the event they become reality. In the nutshell, enough thoughts on potential risks and management strategies would have averted the crisis now they are in.Read more
“I need Term Loan urgently whereas Banker is insisting for Project Report”- A common grievance among many SMEs in India
Detailed Project Report (DPR) prepared before starting a new project can eliminate risks to a large extent, reduce the timeframe of execution and contribute significantly to
Recently I met an entrepreneur who has started a new project in food processing space. He started construction work and given advance to machinery supplier. He approached his bank for financial assistance. Since his record of the relationship was very good, they readily agreed to sanction the loan.Read more
Reclassification of MSMEs- A much-needed policy correction
Recently Govt of India had proposed to amend the classification of SMEs by linking solely to turnover. The move is a much-needed correction to address the policy needs of the segment.
Presently the MSMEs are classified as per Micro, Small and Medium Enterprises Development Act, 2006. As per this, the MSMEs are broadly classified into Manufacturing and series sector. These are further classified into micro, small and medium enterprises based on investment in plant & machinery for manufacturing and investment into equipment in respect of services sector.Read more
Altering the scale of the project in the middle of execution- A risk for SMEs in India
Many entrepreneurs while executing the new project, fall to the temptation of revision in the scale of the project without proper funding arrangement and cause misery for themselves.
Recently I came across a case of an entrepreneur who set up a new modern rice processing plant. The capacity envisaged initially at 10 tonnes per hour. They had bank loan sanctioned for this and in addition, the bank had also sanctioned the matching working capital facility to be made available upon commissioning of the new plant.Read more
Growing market share of private banks means dwindling space for social banking?
Private Banks are shunning the burden of participating in govt schemes and thereby depriving a section of the population of opportunity to avail credit linked facilities.
Recently I came across a case of a woman entrepreneur who has been sanctioned a loan of Rs 10 lakhs under PMEGP. The loan was forwarded to the bank notified by her. It was a private sector bank, where she has been maintaining her current account for a long time. When the application was received by the branch she had a shock. The branch head categorically told her that they would not be able to support her as they do not promote the govt sector schemes. She was flabbergasted at the reply as she has been having a very long-standing relationship with the bank. Her only undoing was it is a Govt sponsored scheme loan which that bank avoids to participate.Read more