Apr 07 2021

It is no news that the global economy is struggling after the huge blow of COVID-19 pandemic. The lockdown restrictions combined with the new social distancing norms have changed consumer behaviour and the ways of business operations in today’s time. India is no exception to the fact and the Indian economy has been hugely affected by the pandemic as well. The market inflation, changing consumer behaviours, shifts in the market trends has led to a struggling business sector.

While the major and large brands and multinational companies have recovered the losses, some have even made profits during the times of the pandemic. Although this completely depends upon the niche of the business and how the COVID-19 pandemic affected its market, demand rate and user behaviour. Although, when it comes to MSMEs or micro, small and medium enterprises, a majority of them have been struggling in these difficult times.

In this article, we have talked about the three most important schemes announced by the government of India for MSMEs. Before we go into the details of these schemes, we must understand that these businesses are extremely important in the Indian economy. This has warranted the government to take extra steps and ensure their survival in times when the global economy is in recession.

MSMEs Play A Key Role In The Indian Economy

MSMEs have always been crucial in the Indian economy. They are a key source of huge employment generation opportunities that require comparatively lesser capital investments than the large enterprises. MSME have been the pillars of the industrialization of rural and backward areas of India and have contributed greatly to diminish regional imbalances.

These businesses require special attention in today’s time as they are an integral part of the Indian economy and ensure equitable distribution of national income and wealth. The Government of India, quite consequently, has been taking proactive measures to ensure that the MSMEs are able to survive the tough times imposed by the recent pandemic.

Not just during the pandemic, but even before that, the government tried to lend out some benefits in the form of some specialized MSME schemes to the MSMEs in time. Along with that, various announcements have been made under the Atmanirbahar Bharat Package to provide immediate relief to the MSME sector.

Let us take a look at the three most important and must know MSME schemes announced by the government. This also includes all relevant details, benefits as well as the eligibility criteria for each of the schemes designed to ensure the prosperity and growth of MSMEs in the country.

The Must-Know MSME Schemes And All Important Details

Collateral free automatic loans for businesses (Package worth: ₹3,00,000 crores)

A special scheme that applies to MSMEs and traders in the country, the benefits can be enjoyed by businesses with a total credit limit of 25 crores as on 29th February 2020. Along with that, MSMEs that have an annual turnover of under 250 crores are also eligible for this scheme.

This scheme applies to SMA 1 or SMA 0 accounts only. Although the government states that The Guaranteed Emergency Credit Line will be available till 31st October 2020, and considering that allocated fund of 3 lakh crore is still available. Any business applying for a loan under this scheme must be registered under GST if they are eligible and applicable for a GST registration.

The scheme mentions that any applicant enterprise’s  total outstanding amount must consist of WC loans, terms loans, and WCTL loans. In a case where there are multiple lenders, the business can approach various lenders to pay 20% of the amount each, under the scheme. A thorough CIBIL score and other lending credentials check is mandatory to verify the total outstanding amount as on 29th February 2020.

The total repayment period of the loan under this scheme is set to 4 years and the moratorium period on the principal amount is set at 1 year. The banks cannot charge any guarantee fees on the loan amount under this scheme.

Subordinate debt for MSEs

(Package worth: ₹20,000 crores)

The subordinate debt scheme was introduced by the government especially for the distressed MSMEs that fall under the SMA 2 or NPA category as of 30th April 2020. Although the account of the businesses must fall under the standard category as of 31st March 2020 as subordinate debt is a tier above normal debt and forms a part of the business equity.

The eligible loan amount under this scheme is 15% of the promoter’s stake or Rs. 75 lakhs, whichever is lower. The loan is granted to the promoter, who will then invest the funds in a particular MSME as equity. The repayment module under this scheme is fixed by the lender, although a maximum limit of 10 years is set. The moratorium period can be a maximum of seven years on the principal amount.

The rate of interest on loans under this scheme is based on the guidelines mandated by the Reserve Bank of India. All public sector banks, private sector banks, as well as foreign banks can lend to stressed MSMEs under this scheme.

Equity infusion for MSMEs

(Package worth: ₹50,000 crores)

This is a specialized scheme for growing companies and it was announced by the Government on 13th May 2020. The scheme works in a Fund of Funds system and will be operated as a mother fund and multiple daughter funds system. The Government will invest 10,000 crores in funds and will then multiply the amount and bring it to 50,000 crores which will be invested in MSMEs in need of help.

It will also help MSMEs in the country to get listed on the main board of the Stock Exchange. The scheme will work in a way that the calculations of investments on plant, machinery, or equipment are linked to the ITR of the previous years, in accordance with the IT Act.

Under this scheme, all tangible assets will be taken into account with an exception to land, building, furniture, and fittings of the business. For new businesses, the calculation of the investments is on the basis of self-declaration and the invoice value of the tangible assets of the same. All export turnover will be disregarded and will be linked to the self-declaration and GSTIN of the enterprise till the date 31st March 2021.

Final Words

Along with these three must-know schemes for MSMEs during these distressing times, there are many other schemes announced by the Government of India. You can also download the publishing to check out the details of other schemes announced by the Government.

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