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Govt Announces Rs 3 Lakh Crore Collateral-Free Automatic Loans For MSMEs
These loans will have a four-year tenure and have a moratorium for 12 months on principal payment.
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Finance Minister Nirmala Sitharaman on Wednesday announced a series of liquidity measures for millions of small businesses reeling under the impact of COVID-19 lockdown, including collateral-free automatic loans worth Rs 3 lakh crore.
Borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover will be eligible. These loans will have a four-year tenure and have a moratorium for 12 months on principal payment. There will be a 100 per cent credit guarantee cover to banks and non-banking finance companies on principal and interest. The scheme can be availed till October 31.
"This will enable 45 lakh micro, small and medium enterprise (MSME) units to resume business activity and also safeguard jobs," said Sitharaman. "The government will provide stressed MSMEs with equity support. We will facilitate the provision of Rs 20,000 crore as subordinate debt."
For the subordinate debt for stressed MSMEs, promoters of MSMEs will be given debt by banks, which will then be infused by the promoter as equity in the unit. The subordinated debt facility will help two lakh stressed MSMEs.
"A fund of funds being created for infusing about Rs 50,000 crore as equity into MSMEs. This will benefit those MSMEs who have the potential and are viable. The corpus of the fund will be Rs 10,000 crore," said the Finance Minister.
Sitharaman said that there will also be a change in the definition of MSMEs so that they can grow in size and get benefits. The investment limit which defined MSMEs has been revised upwards.
"Additional criteria being brought in is turnover size. The earlier differentiation between manufacturing and service MSMEs will be categorised similarly," said Sitharaman.
To help MSMEs further, global tenders will be banned for government procurement up to Rs 200 crore. "Indian MSMEs often faced unfair competition from foreign companies. This will be a step towards self-reliant India and support Make in India," she said.
Another measure the government has taken will deal with e-market linkage across the board for MSMEs.
"Post-COVID, trade fairs and exhibitions will be difficult so e-market linkage will be provided for MSMEs so that they will be able to find their market. Also, the government and central public sector enterprises will honour every MSME receivables in the next 45 days," Sitharaman said.
During his address to the nation on Tuesday, Prime Minister Narendra Modi had announced a stimulus package totalling Rs 20 lakh crore to rescue the economy reeling under the impact of coronavirus. This amounts to nearly 10 per cent of India's GDP.