Govt to revamp revival framework for MSMEs

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Subscribe to enjoy similar stories. New Delhi: The government is working on revamping the framework for revival and rehabilitation (FRR) of debt-ridden micro, small, and medium enterprises (MSMEs) in order to make it easier for small businesses to restructure the loans they have taken out, said two people in the know of the development. The framework would be known as FRR 2.0.

The existing 2015-16 framework, which covers MSMEs with a debt of up to ₹25 crore, calls for lenders to come up with a plan to recover debt and streamline the operations of the enterprise. Although restructuring loans for larger businesses is commonplace, that is not the same for small businesses. Smaller businesses which have less capital need more of a cushioning during financial distress.

The revamp is being considered to boost entrepreneurship, said a person in the know of the development. "The MSME ministry is working on the framework. It is yet to be finalized.

This is aimed at helping MSMEs to get their loans restructured in case of financial distress. Distressed small businesses should be relieved through this framework," said one of the people cited above, adding that the new framework would also ease the procedure for lenders. Over 58 million MSMEs contribute to about a third of the country's gross value added every year.

From April 2023 to May 2024, MSMEs contributed to over 45% of Indian exports. MSMEs also employed over 216 million people as of 12 January, as per the government's Udyam portal. The sector, however, has consistently faced challenges in securing and repaying loans.