Loan for MSMEs to Boost Economic Recovery

Smt. Nirmala Sitharaman, the Hon’ble Finance Minister, announced details of the 20 lakhs crore Financial Aid package on 13.05.2020 called Atmanirbhar Bharat to support MSMEs in India.
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Collateral Free Loans
Collateral free loans amounting to INR 3 lakhs crore have been announced. The eligibility criteria for this is that the borrower should have less than INR 25 crore outstanding and turnover of INR 100 crore. The tenure of the loan would be 4-years with 12-months moratorium on Principal repayment. 100% credit guarantee cover will also be given to Banks and NBFCs on principal and interest. This scheme can be availed till October 31st,2020. It is expected around 45 lakh units will benefit from this.

Rs 3 lakh crores Collateral free Automatic Loans for Businesses, including MSMEs

  • Businesses/MSMEs have been badly hit due to COVID 19 need additional
    funding to meet operational liabilities built up, buy raw material and restart
    business
  • Decision Emergency Credit Line to Businesses/MSMEs from Banks
    and NBFCs up to 20 of entire outstanding credit as on 29 2 2020
  • Borrowers with up to Rs 25 crore outstanding and Rs 100 crore
    turnover eligible
  • Loans to have 4 year tenor with moratorium of 12 months on
    Principal repayment
  • Interest to be capped
  • 100 credit guarantee cover to Banks and NBFCs on principal and
    interest
  • Scheme can be availed till 31 st Oct 2020
  • No guarantee fee, no fresh collateral
  • 45 lakh units can resume business activity and safeguard jobs
Support for Stressed MSMEs
Subordinate debt amounting to INR 20,000 crore would be provided to MSMEs that are stressed or NPA. The debt will be given to promoters of MSMEs to infuse the debt amount as equity into the unit. A support of INR 4,000 crore will also be provided to CGTMSE, which will further provide partial Credit Guarantee Support to Banks. An estimated 2 lakh units will benefit from this.

Rs 20,000 crores Subordinate Debt for Stressed MSMEs

  • Stressed MSMEs need equity support
  • GoI will facilitate provision of Rs 20 000 cr as subordinate debt
  • Two lakh MSMEs are likely to benefit
  • Functioning MSMEs which are NPA or are stressed will be
    eligible
  • Govt will provide a support of Rs 4 000 Cr to CGTMSE
  • CGTMSE will provide partial Credit Guarantee support to
    Banks
  • Promoters of the MSME will be given debt by banks, which will
    then be infused by promoter as equity in the Unit
Equity Infusion into MSMEs
This scheme is for MSMEs that have viability and growth potential but face shortage of equity. FoF will be set up with corpus of INR 10,000 crores. This shall be operated through a Mother Fund and few daughter funds. This is expected to leverage around INR 50,000 crore of funds at daughter fund level.

Rs 50,000 cr. Equity infusion for MSMEs through Fund of Funds

  • MSMEs face severe shortage of Equity.
  • Fund of Funds with Corpus of Rs 10,000 crores will be set up.
  • Will provide equity funding for MSMEs with growth
    potential and viability.
  • FoF will be operated through a Mother Fund and few
    daughter funds
  • Fund structure will help leverage Rs 50,000 cr of funds at
    daughter funds level
  • Will help to expand MSME size as well as capacity.
  • Will encourage MSMEs to get listed on main board of Stock
    Exchanges.
Revised MSME Classification
Changes have been made to MSME definition to benefit more enterprises.

Existing and Revised Definition of MSMEs

Reference: I have collated the above slides from the Government of India presentation for quick reference.

Download Here: Atmanirbhar-Bharat-MSME-Benefits

Loan for MSMEs to Boost Economic Recovery

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