Credit & Financial Facilities to MSMEs (Micro, Small & Medium Enterprises)

MSME sector has been recognised as a very important sector of the Indian Economy. MSMEs play a major role in industrialization of rural & backward areas and also play a crucial role in providing large employment opportunities. Ministry of Micro, Small & Medium Enterprises (M/o MSME) envision a vibrant MSME sector by promoting growth and development of the MSME Sector.

Definition of MSMEs

1. Manufacturing Sector

Investment in Plant & Machinery

  • Micro Enterprises- Investment does not exceed Rs. 25,00,000/-
  • Small Enterprises- More than twenty-five lakh rupees but does not exceed five crore rupees
  • Medium Enterprises- More than five crore rupees but does not exceed ten crore rupees

2. Service Sector
Investment in Equipment

  • Micro Enterprises- Investment does not exceed Rs. 10,00,000/-
  • Small Enterprises- More than ten lakh rupees but does not exceed two crore rupees
  • Medium Enterprises- More than two crore rupees but does not exceed five crore rupees

Some Credit and Financial Facilities to MSMEs

1. Prime Minister’s Employment Generation Programme (PMEGP)

The scheme aims to generate employment opportunities in rural as well as urban areas of the country through setting up of new self-employment ventures /projects/micro enterprises. Another objective is to provide continuous and sustainable employment to all segments of traditional and prospective artisans and rural/urban unemployed youths in the country, so as to help and to arrest migration of rural youths to urban areas. Third objective is to increase the wage-earning capacity of artisans and contribute to increase in the growth rate of rural and urban employment.
Only new projects are considered for sanction under PMEGP.

Nature of Assistance:

The maximum cost of the project/unit is Rs. 25 Lakhs in case of manufacturing sector and Rs. 10 Lakhs in case of business/service sector.

Subsidy (% of project cost):

Category Subsidy (%)
General Category (Urban) – 15% 15%
General Category (Rural) – 25% 25%
Special Category (Urban)

(including SC / ST / OBC / Minorities / Women, Ex-servicemen, Physically handicapped, NER, Hilly and Border areas, etc.): 25% (Urban), 35% (Rural).

25%
Special Category (Rural)

(including SC / ST / OBC / Minorities / Women, Ex-servicemen, Physically handicapped, NER, Hilly and Border areas, etc.): 25% (Urban), 35% (Rural).

35%

How to apply:

Only online application is accepted. The beneficiaries can submit their application online at https://www.kviconline.gov.in/pmegpeportal/pmegphome/index.jsp.

2. Credit Linked Capital Subsidy Scheme for Technology Upgradation (CLCSS)

The objective of CLCSS is to facilitate technology to MSEs through institutional finance for induction of well-established and proven technologies in the specific sub-sector/products approved under the scheme.

Nature of Assistance:

Upfront subsidy of 15% on institutional Credit up-to Rs. 1.0 Crore (i.e. subsidy cap of Rs. 15.00 lakh) for identified sectors/ subsectors/technologies.

How to apply:

Candidates meeting the eligibility criteria may approach 11 nodal Banks / Agencies. These are SIDBI, NABARD, SBI, BoB, PNB, BOI, TIIC, Andhra Bank, Corporation Bank, Canara Bank and Indian Bank.

Eligibility: Any MSME unit

3. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

Ministry of Micro, Small and Medium Enterprises and Small Industries Development Bank of India (SIDBI) jointly established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in order to implement Credit Guarantee Scheme for Micro and Small Enterprises (MSEs). The corpus of CGTMSE is contributed by Government of India and SIDBI.

Nature of Assistance:

Collateral free loan up-to a limit of ₹ 200 lakh.

Who can apply:

New as well as existing Micro & Small Enterprises.

How to apply:

MSE meeting the eligibility criteria may approach eligible Banks / Financial Institutions/ Regional Rural Banks/NBFCs.

4. 2% Interest Subvention Scheme

The scheme aims at encouraging both manufacturing and service enterprises to increase productivity and provides incentives to MSMEs for on boarding on GST platform which helps in formalization of economy, while reducing the cost of credit. The scheme is in operation for a period of two financial years (FY 2018-19 and FY 2019-20).

Nature of Assistance:

The interest relief will be calculated at two percentage points per annum (2% p.a.), on outstanding balance from time to time from the date of disbursal / drawal or the date of notification of this scheme, whichever is later, on the incremental or fresh amount of working capital sanctioned or incremental or new term loan disbursed by eligible institutions.

Who can apply:

All MSMEs who have valid Udyog Aadhaar Memorandum [UAM] and valid GSTN Number shall be eligible as beneficiaries under the scheme.

How to apply:

MSMEs may apply to eligible lending institutions under the scheme.

5. Support for Entrepreneurial and Managerial Development of MSMEs through Incubators

The objective of the scheme is to promote & support untapped creativity of individual and to promote adoption of latest technologies in manufacturing as well as knowledge based innovative MSMEs (ventures) that seek the validation of their ideas at the proof of concept level.

Nature of Assistance:

Financial assistance up to 15 lakhs for developing/ nurturing the ideas. Up-to Rs. 1.00 crore for procurement and installation of plant and machines in Business Incubator. Up-to Rs.1.00 Crore as seed capital support to appropriate Incubates in the form of soft loan, interest free loan, equity participation, grant or combination of these etc. for setting up of Startups.

Who can apply:

Technical colleges, Universities Colleges other professional Colleges/ Institutes, R&D institutes, NGO involved in relevant activities etc., EFCs of DC (MSME), MSME-DIs/TCs /DICs or any institute/organization of Central/State Govt. may apply to register as Host Institute. Students/MSMEs can apply to the registered Host Institute for developing and nurturing the ideas.

How to apply:

Students/Entrepreneurs/MSME will apply to National Monitoring & Implementing Units (NMIU) through Implementing Agency (IA) on MIS portal for availing the benefit of the schemes.

6. Design Clinic Scheme

The objective of Design Clinic Scheme is to enhance industry understanding and application to design and innovation, and to promote design as a value adding activity and integrate it into mainstream business and industrial process of MSMEs; bring the industrial design fraternity closer to the MSME Sector; increase the awareness of the value of design and establish design learning in the MSME, and increase the competitiveness of local products and services. Activities under the scheme include (i) Design Awareness Seminars/Workshops (ii) Professional Design Projects (iii) Student Design Projects (iv)Orientation programmes.

Nature of Assistance:

There is a provision of financial assistance of Rs. 15 Lakh (GoI: Units: 75:25) for individual or upto 3 Micro units and 25 Lakh (GoI: Units: 75:25) for more than 3 Micro units. For Small & Medium units, it is Rs. 25 lakh (GoI: Units: 60:40) for individual or upto 3 Units and Rs. 40 Lakh (GoI: Units:60:40) for more than 3 Units.

Who can apply:

All Udyog Aadhaar Memorandum (UAM) registered manufacturing Micro, Small and Medium Enterprises (MSMEs) profitable entity in last three years are eligible to take the benefit of scheme.

How to apply:

The MSME can submit their application to NID, Ahmedabad, IISC Bengaluru who have been nominated as IA.

RBI Circular No RPCD.CO.Plan.BC. 24 /04.09.01/2009-10 dated 18th Sept 2009 read with Govt of India communication dated 12th June 2009:

“There will be no separate category for “Retail Trade” under priority sector. Loans granted by banks for Retail Trade [i.e. advances granted to retail traders dealing in essential commodities (fair price shops), consumer co-operative stores; and advances granted to private retail traders with credit limits not exceeding Rs. 20 lakh) would henceforth be part of the Small (Service) Enterprises”

Hence, by virtue of above circular, credit granted to Trading Concerns with limit not exceeding Rs. 20,00,000/- (although trading units are not covered under MSME) will be treated as Priority Advance under MSME Scheme. Hence, small trading firms can approach the banks & avail 2% interest subvention scheme under MSME, and also save huge amount on renewal fees.

Tags:

Author Bio

Qualification: CA in Practice
Company: SANDIP AGARWAL AND CO
Location: SILIGURI, West Bengal, IN
Member Since: 30 Dec 2019 | Total Posts: 2

My Published Posts

More Under Finance

One Comment

Leave a Comment

Your email address will not be published. Required fields are marked *