Micro, Small and Medium-sized Enterprises is a key sector contributing around 30% to the total GDP in India. There are around 6.3 crore MSMEs in India employing around 120 million people across the country. About 20% of the MSMEs are based out of rural areas, which indicates the deployment of significant rural workforce in the MSME sector. Lately, MSMEs have been severely hit which led to the closure of several units and hence, loss of employment and livelihood for workers. The government of India has taken several initiatives to address the financing needs of the stressed sector.
Credit lifeline expansion
The Centre last month removed the celing of Rs 500 crore on outstanding loans. However, the maximum additional loans they can take under the scheme is limited to 40 per cent of the outstanding loan, or Rs 200 crore, whichever is lower.
Fund of Funds Scheme for MSMEs
The government on August 5, last year issued guidelines regarding Self-Reliant India (SRI) Fund, which had a corpus of Rs 10,000 crore, to leverage equity infusion of Rs 50,000 crore for the MSMEs.
Credit Guarantee Fund Trust for Micro and Small Enterprises
The centre launched credit Guarantee scheme on June 24 last year to provide Rs 20,000 crore as subordinate debt to provide equity support to the stressed MSMEs. According to the scheme, the guarantee cover worth Rs 20,000 crore will be provided to the promoters who can take debt from the banks to further invest in their stressed MSME units as equity.
Prime Minister’s Employment Generation Programme
It’s is a major credit-linked subsidy programme aimed at generating self-employment opportunities through establishment of micro-enterprises in the non-farm sector by assisting traditional artisans and unemployed youth in rural as well as urban areas.
MUDRA business loan
This scheme offers loans for small businesses and start-ups via low-cost credit. This loan is financed through public and private sector banks. MSME working in the manufacturing, trading, and service sector can avail of this loan.
Udyogini
This scheme was launched to empower women entrepreneurs. The funding under this scheme is given to support women in meeting their capital requirements for starting a business. The maximum loan granted under this scheme is Rs. 15,00,000. An eligible woman entrepreneur must be between the age of 18 years to 55 years.
National Small Industries Corporation Subsidy
THis scheme aids the growth of MSMEs by giving services including finance, market, technology. NSIC SIC comes with two schemes – Marketing Support Scheme and Credit Support Scheme.
Resolution Framework 2.0
In the wake of second wave, the RBI last month announced Resolution Framework 2.0, which allows lenders to restructure loans of individuals and small businesses. The policy nudges lenders and card issuers to be more transparent while it fixes timelines within which financial institutions should act. The RBI allowed institutions to review the working capital sanctioned limits, based on a reassessment of the working capital cycle, margins, and so on.
Reclassification of MSMEs
Individual borrowers, small businesses and MSMEs having aggregate exposure of up to Rs 25 crore and classified as ‘Standard’ as of March 31, 2021, are eligible for the latest framework.
