Over 88,500 MSMEs are sick, face challenges like lack of demand and inadequate credit : KH Muniyappa

NEW DELHI: The government today said there were over 88,500 sick Micro, Small and Medium Enterprises (MSMEs), which have been facing challenges like lack of demand and issue of inadequate credit, as on March 31, 2012.

Referring to the RBI data from scheduled commercial banks, MSME Minister K H Muniyappa said, "There were 85,591 sick Micro and Small Enterprises (MSEs) and 3,044 sick medium units in the country at the end of March 2012."

The major factors affecting growth of MSMEs include lack of demand, shortage of working capital, marketing problems, shortage of raw-material and power crunch, Muniyappa said in a written reply to the Rajya Sabha.

The rehabilitation package for the revival of viable sick MSEs is provided by primary lending institutions, including commercial banks, which provide credit to the these units, he said, adding the package is determined as per the norms issued by the Reserve Bank of India from time-to-time.

The latest guidelines were issued by the RBI in November 2012, based on the recommendations of a committee set up by the MSME Ministry to examine the definition of sickness and the procedure for assessing the viability of sick MSEs.

These norms include early detection of sickness, a viability study to form the basis of rehabilitation package to potentially viable sick MSEs and a non-discretionary one time settlement scheme for the MSE sector.

The MSME sector contributes about 40 per cent to the country's total exports and about 45 per cent to the manufacturing activities.