Kochi: A recent study conducted by CRISIL, the country’s premier credit rating agency, has found that lack of timely and adequate credit and delay in payments make a dent in the profits of micro, small and medium enterprises (MSMEs).
The study on 5,000 MSMEs reveals that they can enhance profits by at least 15 per cent if they receive payments on time from corporate customers.
CRISIL estimates that timely payments from large customers will help SMEs reduce interest costs, improve profitability and have a positive impact on the long-term health and sustainability of the sector.
Delays in settlement of dues adversely affect the recycling of funds and business operations of the MSME units. It is, therefore, critical to ensure that small entities are able to raise liquidity timely against their receivables, the study says.
It is against this backdrop, SIDBI (Small Industries Development Bank of India) and NSE Strategic Investment Corporation Ltd (NSICL) – a subsidiary of NSE- have jointly set up the first Receivables Exchanges of India Ltd (RXIL). RXIL that came into effect on January 9, 2017 is the first entity to operationalize a “Trade Receivables Discounting System” (TReDS).
TReDS is an institutional mechanism under the RBI guidelines that facilitates the financing of trade receivables on electoral platform through a transparent bidding process. A recent announcement of Finance Minister for registration of all major PSUs on TReDS platform is a shot in the arm on MSME ecosystem.
The recently launched MSME Samadhan is an another step by the ministry to alleviate the impact of delayed payment on SMEs.
MSME Samadhan is a digital portal, which will empower micro and small entrepreneurs across the country to directly register their cases relating to delayed payments by Central Ministries, departments, CPSEs and State governments. Since the portal gives the details of the delayed payments, the CEO of PSEs and secretary of the Ministries concerned will be able to monitor the cases and issues necessary instruction to resolve the issues. The portal will greatly facilitate the monitoring of the delayed payments in a more effective manner, claims the MSME ministry.