Laghu Udyog Bharti, Rajasthan has submitted suggestions on the strengthening of Eco-system of MSME’s to Respected Shri V. Sriniwas, Additional Secretary, The Ministry of Personnel, Public Grievances and Pensions, Govt. of India and text of the same is as follows:-


date: 09/01/2019

Respected Shri V. Sriniwas,
Additional Secretary,
The Ministry of Personnel, Public Grievances and Pensions, Govt. of India,

Subject: Strengthening of Eco-system of MSME’s

Dear Sir,

The views and suggestion of Laghu Udyog Bharti, Rajasthan on the strengthening of Eco-system of MSME’s are submitted for your kind persual:

1. Ease of access to credit for MSME’s.

1.1).We suggests that the RBI fix a limit of 15 days for the sanction or enhancement of working capital or term loans.

1.2).MSMEs with a good repayment track record should be offered discounts on intrest.

1.3). “In line with the ‘no claim bonus’ discounts for insurance, those MSMEs having no defaults should progressively receive discounts on the ‘normal’ margin requirements,”

1.4).Margin money share should be revised to 15% from 25% for bank guarantee and loan.

1.5).Charges for bank guarantees longer than two years be debited on an annual basis to ease cash flow pressures on MSME’s

1.6),In loans, where there is already sufficient collateral security given by MSME, the practice of asking additional guarantee from other person must be scrapped.

1.7),Interest rate to MSME’s to be at Basic lending rate.

1.8). Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to be mandatory for all banks including NBFC & Co-operative banks.

1.9). Separate credit rating mechanism for MSME’s should be done.

1.10). Separation in fund & non fund limits for purpose of security.

1.11). Bank charges collected for various reasons by different bank must be monitored & stipulated by RBI.

1.12). Bank should give acknowledgement o loan application for tracking purpose.

2. Expediting loan disbursement

2.1). A time limit must be fixed for this purpose.

2.2). The paperwork for signing the various documents must be simplified.

2.3). Sometimes, the field investigation report reaches the bank late, after the loan sanction letter has been issued. Which delay the disbursement of loan.

3. Mudra Yojna

The Government of India’s new Mudra Yojana (Micro Units Development & Refinance Agency Ltd.) aims to cater to the needs of the Non-Corporate Small Business Segment (NCSBS) of the country. Mudra Yojana has opened up new avenues for youth, women and those who wanted to start or expand their businesses. Mudra Yojana has transformed lives of the poor. It has strengthened them economically, socially and provided them a platform to succeed. Its objective is to provide loans of up to Rs 10 lakh to the non-corporate, non-farm small and micro enterprises.

The Mudra Bank has proposed to offer loans up to Rs. 1 million to small businesses. The small companies are classified in three groups; Shishu companies are eligible to avail loans up to Rs. 50,000, Kishore companies are eligible to avail loans up to Rs. 5 lakhs and Tarun companies are eligible to avail loans up to Rs. 10 lakhs.

As per the data available on Mudra Yojana’s more than 13 crore people have been given loans under the scheme.

The total sanctioned amount of loan under Mudra Yojana was Rs 6 lakh crore out of which Rs 5.81 lakhs crores had been disbursed to the beneficiaries.

“Out of the 13 crores beneficiaries, 28 per cent are first-time entrepreneurs, about 74 per borrowers are women and 55 per cent belong to the SC/ST and OBC category.”

Although the Mudra Yojana has many benefits, there are certain downsides to it as well.

Mudra loans exceeding Rs 5 lakhs – that can generate employment – are mere 1.3 per  cent under Mudra Yojana.

The average of sanctioned loans under Mudra Yojana comes at Rs 46,530 while that of disbursed amount is Rs 45,034. This amount could not be considered enough to launch a start up that could provide jobs to others.

This amount is also much lower than the avLrage per capita income of Indians – Rs 1.11 lakh for 2017-18, according to advance estimates of the Central Statistics Organisation (CSO).

Recently, information sourced through a petition filed under Right To Information Act by activist Chandan Kamhe revealed that the number of large-sized loans or disbursements from the banks exceeding Rs 5 lakh – that can generate employment – are mere 1.3 per cent under Mudra Yojana.

There is a potential of conflict of interest due to the nature of roles and  responsibilities of Mudra Bank.

Mudra Bank has a number of roles and responsibilities. The primary responsibility of Mudra bank is to refinance the MFI’s which are lending finances to the micro and small business segment of the country. Not only this, the Mudra bank’s primary responsibility will also include setting down policies and guidelines for financing micro and small businesses and regulating and rat;ng MFIs. Apart from that, it will also be responsible for client protection, recovery methods, developing standardized covenants to govern last mile lending, providing technological solution to last mile, devising and running credit guarantee scheme and creation of better structure for last mile credit delivery. When the same institution is in charge of both lending the micro and small businesses as well as regulating the micro lending industry, the conflict of interest may arise.

Mudra bank seems to promote shadow banking.

Shadow banking is globally discouraged as it is considered one of the flaws of the current financial system which leads to global crisis. At this stage, Mudra bank seems to be promoting shadow banking as its operations are not under the administration and regulation of Reserve Bank of India (RBI). As such, there is a chance of potential operational risk when Mudra Bank grows in size.

There is a better solution to finance micro acid small businesses.

It makes more sense to create small banks to finance micro and small business segment or migration of the existing MFIs to small banks than creating one more financing agency. These institutions already have the required domain knowledge to properly fund the micro and small businesses.

Multiple regulators for MFIs.

Currently it is the responsibility of RBI to regulate all the MFIs. However, one of the primary responsibilities of Mudra bank is to regulate all the MFIs. This means that now there are two bodies which will regulate the micro lending industry. This will create more problems for the MFIs in future.

4. Employees of MSME’s to be covered under Bima Yojna & PMEDY.

All savings bank account holders in the age 18 to 70 years are entitled to join. Enrollment Modality / Period: The cover shall be for the one year period stretching from 1st June to 31st May.


Table of Benefits Sum Insured
a. Death Rs. 2 Lakh
b. Total and irrecoverable loss of both eyes or loss of use of both hands or feet or loss of sight of one eye and loss of use of hand or foot Rs. 2 Lakh
c. Total and irrecoverable loss of sight of one eye or loss of use of one hand or foot Rs. 1 Lakh

Premium: Rs.12/- per annum per member.

The premium will be deducted from the account holder’s savings bank account through ‘auto debit’ facility in one installment.


4.1. The scheme is operated by enrollment o individual account holder through theirs saving account and by paying the annual premium. If it is to be extended to employees of MSME’s, then there should be a provision in the scheme where employers can enroll his employees for the benefit of the scheme, by paying their premium amount. This will be a very good for social security of employees.

4.2. The state government can take initiative by like Kerla government which has sanctioned an amount of Rs 1 crore for the implementation of the scheme, which will be linked to the Pradhan Mantri Jeevan Jyoti Bima Yojana and the Life Insurance Corporation of India’s group insurance scheme.

5. Use of Trade Platform by MSME sector and e-commerce portal linkages.

E-commerce platform is fast emerging as a new trend in global trade and SMEs should use this medium to get direct access to the In ‘rld markets. SMEs should make use of new trends in global trade. Use of e-commerce platform could provide market access across borders. In the long run, e-commerce will increasingly become a significant route to create opportunities for SMEs to have direct access to the world markets and to get the best value for their products.


5.1. Tie up with government agencies for online promotion and selling of traditional handicrafts.

5.2. In December, 2018 Central Communications Minister Manoj Sinha launched the e-commerce portal of the Department of Posts providing an online market place to rural artisans and public sector units to sell their products. The primary objective of portal is to provide a medium to sell products for small artisans. However, anyone who wants to sell their product can sell on the site. The Portal will provide an e-market place to sellers especially to rural artisans, self-help groups, women entrepreneurs, state and central PSUs, autonomous bodies to sell their products to buyers across the country,” a Communications Ministry statement said.

The products will be shipped through the postal department’s Speed Post service.

The similar site by state government must be launched.

While there is clearly an opportunity to capture, there is a lot that is needed to be done to develop cross-border e-commerce within the country

  • As of February 2018, 35 countries support ePacket deliveries, and India was not in that list. ePacket shipping must be allowed in India also.
  • Increase limits on Courier Shipments: As per current regulations, there is a limit of $ 375.3 on shipments that can be transported through couriers which also involve foreign exchange. Increase in this limit would enable higher value products which are sought internationally such as lehengas etc. to be exported as well.
  • Infrastructure: Most of the customs procedures still takes place through a manual process. By switching over to the customs electronic data interchange (EDI) platform, it would enable the procedure to take place in a smoother and faster manner.
  • Developing Awareness: There is a need to educate the MSMEs in the country as to the opportunities that lie by expanding the scope of their operations abroad. Current issues include:
    • An absence of a known mechanism to reach out to foreign buyers
    • Need for improvement in quality of products that have high international demand and
    • Inadequate buyer and market-related information of countries around the globe
  • Paperless: One of the main factors in e-commerce is delivery time. By reducing the amount of paperwork that is involved and by enabling a risk-based inspection, shipments will be able to reach their destination in a timely manner
  • Return of Goods: In e-commerce, there are always instances of unhappy customers and return of products. A seamless procedure needs to be developed that would enable the return of the products, without the exporter having to incur import duties on the returned shipment.
  • Single Window Clearance: There is a need for a single window clearance for shipments of goods through a transparent and paperless process. Cross-border e-commerce can typically involve shipment of thousands of products on a daily basis; a single window clearance for bulk export of products to different locations would ease in the compliance requirements for the exporters.

6. Review of PMEGP/ PM Kaushal Vikas Yojna/ Rural Employment Training.

PM Kaushal Vikas Yojna

The objective of this much publicized program is to provide “industry-relevant skill training that will help them in securing a better livelihood”. An ambitious target of training 1 crore youth was set spanning a period of four years, 2016 to 2020. Pradhan Mantri Kaushal Vikas Yojana (PMKVY), it has trained 41.3 Lakh persons in the past three years. Only 6.15 Lakh of them have got jobs, according to a reply given by Dharmendra Pradhan, minister for skill development, in the Rajya Sabha on 28 March, 2018. That’s a placement rate of a measly 15%.

This is due to following reasons, which should be looked upon:

6.1. Too many training partners

Many are not competent enough.

6.2. Poor Employment linkage

The training partner has limited resources and linkage in this matter. Details market research and need analysis is not done by them.

6.3. Poor monitoring mechanism

Flow of information, data, transparency, quality, funds become a big challenge for monitoring unit with limited staff.

6.4. Franchise Model

Few training partner works under Franchise Model

6.5.Not enough trainers

India need approximately 20000 skilled trainer every year, but at present produce only half of that every year.

Sir, Submitted for your kind perusals.

With regards

Er. Mahendra Kumar Khurana
General Secretary, Laghu Udyog Bharati, Rajasthan

Copy to

1. Commissioner Industries, Govt. of Rajasthan, Jaipur for information

2. General Manager, DIC, Jaipur for information

Laghu Udyog Bharati, Rajasthan

Suggestion for MSME as received in the latest message*

(Received in morning of 09.01.2019)

Dear Sir,

Good day!

As I just came to know that many women entrepreneurs are unable to register their company profile on MSME shopping portal. They don’t know how to register on an e-commerce portal and how to upload their product images and it’s detailed on it.

Although the virtual video is there, but they (women entrepreneurs) are unable to understand. So, in this digital scenario, they must know how to sell on e-commerce portal and earn without any hindrance.

It’s a suggestion that MSME must arrange some practical training programme for women entrepreneurs “How to handle e-portal “so, they can sell their products without hurdles. (e-portal ) is a very good b2b portal to sell and buy the product and also it is a very helpful and beneficial platform to meet buyer and seller at one digital place.

With Regards
*Ms.Santosh Purohit*
(Export management and digital marketing )
LUB Member-Mahila lkaai Jaipur.

  • Another suggestion is to include private Mediclaim in place of the compulsary ESI.
    Workers do not like Esi facilities and want to opt for private mediclaim policies.
  • One suggestion is to make export income exempted under Income Tax laws for MSME companies.

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