Sickness in Micro, Small and Medium Enterprises in India

This paper attempts to examine the growth of number of sick units and to highlight the reasons for sickness in MSMEs sector in India. For this purpose the necessary data required for the study have been collected from Annual reports of Ministry of Micro, Small and Medium Enterprises, Government of India. Lack of demand for the product and shortage of working capital are the main reasons for the sickness in MSMEs. As per the extant guidelines, a Micro or Small Enterprise (as defined in the MSMED Act 2006) may be said to have become Sick, if any of the borrower account of the enterprise remains NPA for three months or more. There is erosion in the net worth due to accumulated losses to the extent of 50% of its net worth during the previous accounting year. This criterion enables banks to detect sickness at an early stage and facilitate corrective action for revival of the unit.