small and medium enterprises development ( msmed ) act, 2006 contains provisions related to penalty in case of delayed payments by the buyers, weak bargaining power and the fear of losing the business prevents msmes to invoke this provision. iii. expert committee on msmes 12. in order to understand the structural bottlenecks and factors affecting the performance of the msmes, rbi had set up an expert committee on msmes under the chairmanship of shri u. k sinha in january 2019. the committee has undertaken comprehensive review of the sector and given several recommendations for the economic and financial sustainability of the msme sector. these recommendations are wide - ranging and broadly relate to legislative changes ; infrastructure development ; capacity building ; technological upgradation ; improving backward and forward linkages ; improving financial support from formal sources ; newer technological interventions for robust underwriting practices ; and credit delivery, among others. while some of the recommendations of the committee have already been implemented, others are under consideration by the authorities concerned. iv. measures undertaken by rbi measures to improve the credit flow 13. the reserve bank has taken several measures in the recent period to improve the flow of credit to the msme sector. banks form the predominant source of formal credit to msmes with all such loans by banks qualifying for priority sector lending classification. in august 2019, we have further incentivised banks to lend to msmes through the nbfc sector. consequently, bank credit to registered nbfcs ( other than micro finance institutions ) for on - lending to micro and small enterprises up to ₹ 20 lakh per borrower are eligible for classification as priority sector lending. 14. a scheme of one - time restructuring without an asset classification downgrade was permitted to gst registered msme accounts that were in default but standard as on january 1, 2019. as the process of formalisation of the msme sector has a positive impact on financial stability and this process is still underway, the scheme has been extended to accounts that are standard but in default as on january 1, 2020 and restructuring, wherever eligible, has to be implemented latest by december 31, 2020. this will enhance the scope of the scheme by benefitting the eligible msme entities which could not be restructured under the provisions of the circular dated january 1, 2019 as also the msme entities which have become stressed thereafter. so far, banks have restructured 6 lakh accounts out of 15 lakh eligible accounts under the scheme. our primary survey suggested lack of awareness

of activities. the greater diversity of institutions that now provide demand for credit risk, or are willing to hold credit risk, should make credit markets more liquid and resilient than would be the case if credit risk was still held predominantly by banks or by a smaller number of more uniform institutions, with less capacity to hedge those exposures. however, we still face considerable uncertainty about how market liquidity will behave in the context of a major deterioration in credit conditions or a sharp increase in volatility in equity and credit spreads, and this uncertainty is hard to quantify and therefore hard to integrate into the risk management process. • the apparent increase in the scale of demand for exposure to credit risk relative to the growth in supply of credit has contributed to a substantial reduction in credit spreads and to some erosion in credit terms. banks and dealers have reported pressure to reduce initial margin levels. the scale of leverage in some transactions is reported to have risen. the spread of portfolio - based margining creates the potential for greater overall leverage in the financial system, and the substantial variance in margin required by different dealers for similar portfolios suggests a wide diversity of views on how to measure the economic exposure. • although banks hold a substantially smaller share of the overall credit risk in the system than they did twenty years ago, this shift understates the importance of the role they play in the underwriting, distribution, trading and market making of credit related assets, and it understates the importance of earnings derived from these activities to overall profitability. major banks and dealers at the core of these markets generate both short - and longer - term credit and market risk exposures from a number of sources and activities, including trading positions, loan commitments that support securities issuance, and warehousing positions in advance of packaging and distributing them. retained interests associated with securitization transactions are substantial relative to capital of the largest firms. and the importance of securitization for the firms - both from a funding and revenue generation standpoint - provides an incentive for them to support investors in these products in ways that may go beyond contractual obligations. • the post - trade processing and settlement infrastructure, particularly in credit derivatives, is still quite weak relative to the significance of these markets, although the major dealers and buy - side investors are making a substantial effort to address these problems. the total stock of unconfirmed trades is large and until recently was growing considerably faster than the total volume of new trades. the time between trade and confirmation