MSME Loan Under Atmanirbhar Bharat Abhiyan, the minister announced several measures for MSMEs that are expected to help 45 lakh business units to resume operations. Here are the key announcements for MSMEs.
Credit guarantee of 3 billion ( 3 Lakh crores) rupees: The highlight of the government’s aid package is the massive increase in credit guarantees for MSMEs. The government’s 3 lakh crore MSME loan guarantee is intended to help MSMEs that have an outstanding loan of 25 crores or less than 100 crores in sales. This provision will save MSMEs who need additional funds to meet their operational liabilities and start operating again. The MSME loans, which were to be taken out before October 31, 2020, have a term of four years and a moratorium of 12 months. There is a 100% loan guarantee for principal and interest. The credit guarantee system is intended to help MSMEs to survive the economic slowdown. Credit guarantees help banks meet MSME credit demand and ensure government loans are repaid.
Subordinated debt liabilities for NPA/stressed MSMEs: The government has chartered 20,000 crores as subordinated debt to help about 2 lakh MSMEs with stressed accounts or non-performing assets (NPA). As part of this program, the sponsors of the MSME receive debts which are then brought into the unit as equity. In contrast to credit guarantees, state support in this system is not complete, but partial.
Fund of Funds: For MSMEs with growth potential and viability the government has created a fund of Rs. 50,000 crore. This fund aims to provide equity capital to help MSMEs expand and grow. While the government is likely to contribute Rs. 10,000 crore, while other institutions such as SBI and LIC are likely to fund the remaining amount. This fund, which is operated through a parent fund and some subsidiary funds, will also help MSMEs to be listed on the main stock exchange.
To support Make in India, government procurement tenders of up to 200 billion rupees are not global tenders. This means that foreign companies cannot bid for them. This will underpin the Prime Minister’s call for an independent India.
Revised definition: The government has changed the MSME definition so that more companies can benefit from the incentives offered in Atmanirbhar Bharat Abhiyan. The new definition of MSME, which has long been on the government’s priority list, takes investment and annual turnover into account and does not differentiate between production and services. The revenue-based definition is seen as a better means of identifying MSMEs, particularly in services such as medium-sized hospitals and diagnostic centers. These can now qualify for services offered to MSMEs. Experts suggest that the new definition would drive the growth of the MSME sector and help make it independent.
Clearance of dues: When announcing the MSME loan guarantee for MSMEs, the finance minister assured that the center would settle outstanding MSME fees in 45 days. As of March 31, 2020, total outstanding payments to MSME units were estimated at over 4.95 Lakh Crore. The ministries and departments of the central government, the state governments, and the public sector units owe MSMEs more than half of this amount. On May 14, 2020, payment claims of 40,720 crores were listed on the MSME Samadhaan website, which was introduced to monitor late payments and to settle disputes involving MSMEs concerned.
The government’s financial incentives will save MSMEs suffering from the effects of the ban and provide much-needed liquidity to the sector. An increase in credit guarantees, subordinated debt, the repayment of outstanding fees, and a broader definition would significantly stimulate the growth of MSMEs and intensify efforts to make the country independent under Atmanirbhar Bharat Abhiyan.
Apply for MSME Loan here.