New Definition & Funds For MSMEs
The definition of MSMEs will be revised and the investment limits will be increased, The distinction between manufacturing and service sector MSMEs will be eliminated. Businesses with investment up to Rs 10 crore, and turnover up to Rs 50 crore to be classified as small business. Businesses with investment up to Rs 20 crore, and turnover up to Rs 100 crore to be classified as medium business.
The government will provide equity funding for MSMEs with growth potetial through a fund of funds with a corpus of Rs 50,000 crore. The government will facilitate up to Rs 20,000 crore liquidity as subordinate debt for stressed MSMEs which are in need of equity support. All non-performing assets and stressed MSMEs will be eligible for it, Sitharaman said. The government will provide a support of Rs 4,000 crore to the CGTMSE which will then provide partial credit guarantee to banks.
Small and medium enterprises will be offered collateral-free automatic loans of up to Rs 3 lakh crore to help them resume business and safeguard jobs. MSME borrowers which have up to Rs 25 crore outstanding loans and a turnover of Rs 100 crore will be eligible for these loans. These loans will have a 4-year tenor and a moratorium will be given for 12 months.
Mehernosh Tata – Head Edelweiss SME Lending commented, “The economic relief package announced by the Government focuses extensively on the MSME sector. MSMEs are the local backbone of the Indian economy at grassroot levels. This move is welcome and much-needed for the MSME sector, and will go a long way in lifting the sentiments and morale of this very important segment. The package has been extremely well thought, both from a sustenance and liquidity point of view.. The announcement of payment of receivables within 45 days to all MSMEs, by the Government of India and CPSEs, will provide requisite liquidity in the hands of entrepreneurs. Restricting tenders less than Rs 200 crores only to Indian entities, provides a great opportunity for MSMEs to get incremental work orders, especially when demand may slump in the near future.”