The Indian government has decided to provide some financial relief to the MSME sector in the form of the “Fund of Funds (FoF) Scheme.” This scheme was announced by Nirmala Sitharaman, the Finance Minister of India, on 13th May 2020. As per the announcement, the aim of the FoF scheme is to infuse ?50,000 equity into MSMEs.
The scheme will cater to around 25 lakhs MSMEs spread across India. The corpus that this scheme has been set up with is around ?10,000 crores. It is a welcome move in the background of high npa in india.
Indian micro, small and medium enterprises that have an ‘AAA’ rating. The triple-A rating is indicative of high credit-worthiness. It is the highest possible rating that is assigned by a major credit rating company?—?like Crisil?—?to an issuer’s bonds. It shows that the issuer (MSME company) has a good track record of meeting their financial obligations and also has the lowest risk of default.
How Will The Fund of Funds Scheme Work for MSME’s?
The Fund of Funds scheme is intended to primarily approach the issue of shortage in equity (growth capital) as well as revenue for MSMEs. The scheme will primarily aid those businesses who are in their nascent and initial stages, where there are almost no prospects to raise funds through the help of professional corporations or venture capitalists. The scheme proposes to buy upto 15% growth capital in high credit MSMEs. Better health of MSME will help in making the economy strong and strengthening the npa management.
In terms of structure, the Fund of Funds scheme will be managed by a ‘Mother Fund’ in addition to a few ‘daughter funds.’ It has been stated that FoF may be operated by the ‘National Small Industries Corporation’ or another governmental body. The scheme’s structure will aid in leveraging ?50,000 crores at the levels of daughter-funds. In tandem, these funds will enable MSMEs to grow in capacity and size. The Fund of Funds scheme will also encourage MSMEs to list themselves on the central board of Indian stock exchanges.
Within the next two years, India’s MSME Ministry has been striving to grow the average rate of turnover of India’s village industry to ?5 lakh crores from its current ?88 thousand crores. According to Gadkari, the FoF scheme offered by the government for MSMEs is going to aid in achieving this target in a huge way. MSME village industries include India’s khadi sector who is expected to play a big role in aiding this goal as it is entering the arena of exports.Agencies offering DRT legal solutions and nclt lawyers Mumbai are preparations to handle the additional demand to manage NPA disputes if any.
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