Page 29 - Banking Finance July 2022

ARTICLE

PRE-PACKAGED

INSOLVENCY

RESOLUTION

PROCESS-A HYBRID

FRAMEWORK TO

SAVE VIABLE MSMES

SME sector in India is second largest debt repayments, wages/salaries, statutory dues, etc.
M acts as a breeding ground for entrepreneurs pandemic have impacted MSMEs earnings by more than fifty
employment generator after agriculture, and
Reports have shown that disruptions caused by the Covid-19
and innovators with considerable support in
percent, Micro and Small enterprises faced the maximum
strengthening business ecosystem. The heat, mainly due to liquidity crunch. Enterprises working in
estimated number of MSMEs in India is 63 million and employs essential commodity business were better off in terms of
110 million individuals. Indian MSMEs produce more than interrupted but predictable cash flows. Some enterprises
6,000 products for local and global consumption. The innovated their ways by shifting focus from non-essential
announcement of country wide lockdown dragged MSME commodities towards essential commodities; like production
owners, employers and external stakeholders in unexpected of hand sanitizer and toiletries, PPE kits, reusable masks, etc.
times, where no one had experience to handle this kind of and are able to survive in tough times. MSMEs present in
situation. Extended lockdown had negative impact on supply remote areas also faced lots of difficulties due to interrupted
of finished goods, procurement of raw material and availability supply chain systems and intrastate lockdown provisions.
of employees to work in production and supply processes.
The government has promulgated an ordinance to introduce
During April to June 2020, sector faced challenges related to a pre-packaged insolvency resolution process for stressed
micro, small and medium enterprises (MSMEs). It will allow
the stressed debtor- in this case the MSMEs- and its creditors
About the author
to quickly work out a plan to revive the company outside the
bankruptcy process, which would then be sanctioned by the
Chander Pandey
courts. It is considered expedient to provide an efficient
Senior Manager (Faculty)
alternative insolvency resolution process for corporate persons
Union Bank of India
Staff College, Bengaluru classified as micro, small and medium enterprises under the
BANKING FINANCE | JULY | 2022 | 29