Page 23 - Banking Finance February 2022

COVER STORY

TREDS: A

CASH FLOW

SOLUTION FOR

MSMES

M SMEs have been facing the problem of maximum of 45 days, would be liable to pay monthly

delayed realization of their bills and
compounded interest at three times the bank rate notified
receivables since long, particularly from large
by RBI.
corporate buyers and government
organizations. At the time of the enactment of the MSMED Act in 2006, it
was felt that the aforementioned provisions would
MSMEs often suffered greatly from delayed payments from prevent buyers of MSMEs' products from committing
customers. Since small businesses require regular cash flow payment defaults, but in reality very few cases were brought
to stay operational, deferred payments, usually from large to the facilitation centers as MSMEs feared losing out on
corporate customers, seriously threaten their operations. business.

Currently, the payment recovery cycle falls above 90 days Government has also launched MSME SAMADHAN Portal
for a majority of MSMEs and payment delays became a (https://samadhaan.msme.gov.in/) which is a delay payment
huge problem for business continuity of such enterprises. monitoring system and aggrieved MSME can file their case
in the site for delayed payment from the corporate buyers
The Micro, Small and Medium Enterprises Development Act, including government departments, PSU etc.
2006, has made provisions to mitigate the problem of
delayed payment, whereby any buyer who fails to make But again the poor MSMEs fears to report the defaults in
payment to MSMEs, as per mutually agreed terms or a order to not lose out on a business relationship from the big
players.
About the author
As per a recent report (statement by Hon'ble MSME
Suraj Kumar Shoundik minister), Central, state governments, government-owned
Manager (Research) companies and the private sector owe small business
State Bank Institute of Credit and outstanding dues worth above Rs 5 lakh crore. Further as a
Risk Management, Gurugram report, almost 30% of the dues are over 120 days, 45% are

BANKING FINANCE | FEBRUARY | 2022 | 23