Key Points for Collateral free MSME loans

1. Eligibility

-All Existing MSME having outstanding balance in their loan account of upto Rs 25 crore as on 29th Feb, 2020 across all lending institution. And,

-Annual Turnover should not exceed Rs 100 crore in FY 19-20. And,

-Borrower account should not be classified as NPA or SMA-2 as on 29th Feb, 2020. And,

-Borrower must be registered under GST except when departure from registration requirement is permissible under GST Act.

2. Scheme would be applicable from May 23, 2020 to 31st October, 2020, or till an amount of Rs. 3 lakh crore is sanctioned under scheme, whichever is earlier.

3. Credit under this scheme would be upto 20% of borrower total outstanding credit (upto 25cr) (i.e. additional credit upto Rs 5 crore).

4. Constitution of MSME- Proprietorships, Partnerships, Registered Companies, Trusts and Limited Liability Partnerships (LLPs), and also interested borrowers under PMMY.

5. other financial institution are eligible as Member Lending Institution under this scheme.

6. This is a pre-approved loan. An offer will go out from the lender to the eligible borrowers for a preapproved loan which the borrower may choose to accept. However, if the MSME accepts the offer, it will be required to complete requisite documentation.

7. What if You have existing limits with multiple lenders, you can avail credit under this scheme either through one lender or from each of the lenders (Subject to max limit)

8. Interest rates Banks are free to decide the spread over the external benchmark as per their approved policies.

9. Banks and Financial institution- RBI prescribed external benchmark linked rates + 1% (Subject to max- 9.25% pa)

10. NBFC- Rate shall not exceed 14%

11. Credit provided under this scheme shall be for 4 years from date of disbursement. No prepayment penalty. No principal repayment in the 1st year. However, Interest shall be payable. No processing fees shall be charged.

12. For loans having co-applicant, only those existing loans where entity is the primary co-applicant is covered under the Scheme for additional emergency funding.

13.Loans extended on or before 29 Feb, 2020 under Pradhan Mantri Mudra Yojana and reported on Mudra portal shall be covered under this scheme.

14. A separate loan account shall be opened for the borrower for extending additional credit under this scheme. This account will be distinct from the existing loan account(s) of the borrower.

15. 100% guarantee would be provided by National Credit Guarantee Trustee Company (NCGTC) to lending Institutions and which will be extended in the form of additional working capital term loan facility in case of Scheduled Commercial Banks and Financial Institutions, and additional term loan facility in case of Non-Banking Financial Companies, to eligible MSMEs/ Business Enterprises and interested Pradhan Mantri Mudra Yojana (PMMY) borrowers.

16. The scheme does not cover the off-balance sheet exposure {Loans) to MSME. Only on balance sheet exposures outstanding as on 29th Feb, 2020 are eligible to be covered under the scheme

Kindly Note– On 1-06-2020, Govt had revised the limits for medium enterprises wherein the investment and turnover limits had been increased to 5 crore and 250 crore, respectively.

Since one of the eligibility criteria for MSME loans is that the turnover of FY 19-20 should be upto 100 crore. Further clarification is awaited from the government about the loan eligibility for those enterprises which gets MSME status due to enhanced Investment and Turnover limits.

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