prpri How to accelerate MSME Growth How to accelerate MSME Growth

N. Srinivasan

National MSME Bills Payment (Factoring) Portal (NMBPP)

The main problem faced by MSME to-day is collection problem for the bills/Invoices raised for goods and Services. Even though many schemes are introduced like “Mudra” “Samadhan” etc., it will be of very temporary in nature and may not be a long lasting Solution. Liquidity affects the Production, Purchase, Delivery, Wage Payments and many more. Unless and until the collections are streamlined, the progress of MSMEs’ and their productivity cannot be improved by leaps and bounds.

In my opinion, the Major problem that affects the MSME is the collection aspect of the Invoice made for Service or Supply or Service & Supply. Timely realization of the trade receivables is the main cause of MSME units’ failures and losses.

Central Government’s initiative of “samadhan.msme.gov.in” is a good initiative but it does not serve the intended purpose/expectations.

Details collected from the portal as on 30.06.2021 at 11.58 hours

Exhibit on Number of Cases Involved

At 11.58 hrs. taken from the portal No. of Cases % Age Settled unsettled Rejection
Applications filed by MSEs 80,555 100% 18.2% 63.2% 18.6%
Applications Mutually Settled 7,265 9%
Applications yet to be viewed by MSEFC Council 30,721 38%
Applications Rejected by MSEFC Council 14,962 19%
Cases Disposed by MSEFC Council 7,398 9%
Cases Currently under Consideration by MSEFC 20,209 25%

Exhibit on the Amount Involved (In Crores) – Compiled Version.

At 11.58 hrs. taken from the portal No. of
Cases
Amount
Payable
Settled Amount % age
Central Government, its departments & PSUs’ 7,437 4,425 366 8.3%
State Government, its departments & PSUs’ 8,354 5,630 167 3.0%
MSME Units 6,342 946 72 7.6%
Individuals & Proprietors’ 18,158 1,875 96 5.1%
Others 40,259 9,029 621 6.9%
Total 80,550 21,905 1,322 6.0%

The above exhibits show only the cases where the aggrieved have lodged their grievances. The settlement procedure is not commensurate with the expectations.

I suggest the Central Government may initiate an Authority for National MSME Bills Payment (Factoring) Authority (NMBP) for quick processing of MSME bills under statute.

Scheme: –

♦ National MSME Bills Payment (Factoring) Authority (NMBPA)

♦ Launching a Payment Portal

♦ Stake Holders – Seller / Buyer

♦ Goods / Services

♦ Intermediaries = Nominated Bankers

♦ Intermediaries = Insurance companies

♦ Required Checks & Balances for the identity

Modality:

♦ MSMEs’ registered / to be registered under “Udyam” are eligible.

♦ Individual Accounts will be opened for the MSME entities

♦ Income tax PAN Number will be allotted as account numbers

♦ Suppliers / Sellers (Goods & Service) will be asked to “Log in” to their account and give the following particulars

1. Name of the Entity

2. Address for Communication

3. IT PAN

4. GST No.

5. Mobile Number linked to Bank Account

6. E-mail address

7. Latest IT acknowledgement

8. Name of the Bank

9. Name of the Branch

10. Account Number

11. Type of Account

12. IFSC code

♦ Fields to be entered while uploading the Invoice / bills

i. Name of the entity – buyer / Receiver of Services

ii. Address for Communication

iii. IT PAN

iv. GST No.

v. E-mail address

vi. Invoice No.

vii. HSN Code if any

viii. Material / Service Description

ix. Invoice Basic Value

x. IGST / CGST / SGST separately

xi. Other Addons to the bill

xii. Type of Payment – Advance / Partial / Full Value

xiii. Due date of Payment as per Contract / agreement

xiv. Attachment of Invoices in PDF format

♦ Processing Methodology

a. On receiving the Invoice in the portal from the Seller / Service Provider, the auto forwarding system will be activated and the details pertaining to the Invoice and a Covering letter with Seller’s details and Invoice details will be posted to the concerned Buyer of goods / Receiver of the Services with a unique id generated for identifying the details.

IF

a. The Buyer is also having an account in the NMBPA Portal, then it will be an internal posting

IF

b. The Buyer is not having an account in the NMBPA portal, then it will be directed to the designated mail with

1. Details of the Invoice with supplier details in a pre-designed template

2. Due date of Payment

3. Payment mode to the NMBPA Portal details like, Name of the Bank, Branch, Account Number and IFSC details

♦ Buyer / Service Receiver will make the payment direct to the NMBPP after deductions for shortage / service deficiency if any. Buyer’s Payment template will be pre-defined for making easy online payment/Payment through Bank/Credit card etc. Separate field for deductions details with Amount and remarks.

1. Pre-defined template for giving break-up details for the paid amount and deductions with space for Remarks

♦ Seller on uploading the Invoice in the portal, he will be receiving the payment within 72 hours of posting. If the seller’s Invoice is rejected totally for payment due to technical reasons, the Seller should make good the 85% payment released within 60 days failing which his membership shall be removed from the portal and necessary penal action will be initiated as per the proceeduere”

♦ Methodology for giving Credit:

1. 25% of the Turnover value declared in the Income tax Return will be the maximum Credit limit

2. Through Bank Guarantee, the Credit limit can be increased over and above 25%

3. Upper credit celling can be fixed by the Government

4. 85% of the Basic Invoice Value + Addons + 100% of taxes less deductions made for short supply / service deficiency.

5. 5% of the Basic value of the Invoice / bill shall be paid upfront while uploading an invoice in the Portal.

6. 15% Balance will be paid after the Buyer / Service receiver makes the payment or 60 days whichever is earlier

♦ In the case of Seller becomes the buyer the procedure followed will be vice versa.

♦ Major Benefits:

1. When the portal handles cases with the turn-over of – say 1,00,000 lakh crores, the upfront processing charges collection will be around 500 crores which may increase over a period and will act as a Cushion for Non-Receivables where court’s intervention may take place.

2. Suitable provisions in the form of enactment will help the authority to realise the dues.

3. Authority can take an Insurance cover for the losses and other incidental expenses.

4. MSMEs’ after uploading the Invoice will get the “Factoring” like benefit and the Authority will be having the sole right for collection.

5. There will be no recourse to the MSMEs

6. The indemnity will not be available for MSMEs’ in cases of fraud, misfeasance etc.,

7. Cumbersome bank loan / fund limits avoided

8. MSMEs’ working cycle and production will have phenomenal increase.

9. Phenomenal increase in GDP and Philip to MSMEs’ growth.

10. Saving lot of MSMEs’ from Interest burden, agony etc.

11. Many more.

To conclude at some stage, it will become a national portal for all commercial payments

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