Credit and Finance for MSMEs: The Emergency Credit Guarantee Scheme (ECLGS) has been maybe the flagship credit scheme of the Modi government to assist MSMEs especially for post-Covid recovery. On the other hand, pre-Covid, in truth, for the previous 20 years, the Credit Guarantee Scheme for Micro & Small Enterprises (CGTMSE) has been amongst the key schemes rolled out to cater to the funding requirement for MSMEs. In involving, a quantity of other credit schemes had been launched by the government for different purposes such as setting up new companies, job creation, exports, manufacturing, females entrepreneurship, stressed units, and more. Here’s a fast lowdown on the 5 prominent credit assistance schemes by the government for MSMEs to look at beyond ECLGS and CGTMSE:
Pradhan Mantri Mudra Yojana
What’s the scheme: The six-year-old scheme focuses on non–corporate smaller and micro enterprises that consist of lakhs of proprietorship or partnership firms such as smaller manufacturing units, service sector units, shopkeepers, fruits and vegetable vendors, truck operators, meals-service units, repair shops, machine operators, smaller industries, artisans, meals processors, and other people. The scheme was launched to cater to these companies as more than 90 per cent of such enterprises lack access to formal sources of credit.
Credit limit and how to apply: The scheme is segregated into Shishu, Kishor, and Tarun indicating the stages of development of a organization and corresponding credit requires. For instance, Shishu loans are up to Rs 50,000, though Kishor loans are above Rs 50,000 and up to Rs 5 lakh. Tarun loans are more than Rs 5 lakh till Rs 10 lakh. Loans can be secured by way of banks, NBFCs, micro-finance institutions, regional rural banks, and foreign banks. Application types can be downloaded from the Mudra web page.
The Reserve Bank of India (RBI) had place a cap on the interest price at the Base price/ MCLR for lending micro units by banks. Likewise, regional rural banks had been offered an interest cap of 3.50 per cent more than and above the Mudra refinance price, as per the scheme’s particulars. In the case of NBFCs, RBI had stipulated an interest cap of 6 per cent more than and above Mudra refinance. As of October 8, 2021, out of Rs 1.13 lakh crore involved in 2.03 crore loans sanctioned, Rs 1.07 lakh crore loans had been disbursed considering the fact that April 1 in the existing monetary year, as per the provisional information on the scheme’s portal.
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Prime Minister’s Employment Generation Programme (PMEGP)
What’s the scheme: PMEGP presents credit-linked subsidies to micro-enterprises launched in the manufacturing and services sectors. According to the scheme’s particulars, as per the central bank suggestions, the project (enterprise) set-up costing up to Rs 10.00 lakhs beneath the scheme is absolutely free from collateral safety though the CGTSME delivers a collateral assure for the project beyond Rs 5 lakhs and up to Rs 25 lakhs beneath PMEGP scheme. Self-assist groups, institutions registered with Societies Registration Act,1860, production co-operative societies, and charitable trusts are also supported beneath the scheme.
Credit limit and how to apply: The scheme facilitates monetary assistance up to Rs 25 lakh for micro enterprises to be launched in the manufacturing sector and up to Rs 10 lakh for companies in the service sector. Individuals above 18 years of age and these who have completed schooling till at least the eighth regular are eligible to apply for the scheme. However, current units that have government subsidies beneath any other scheme can’t apply for it. Applications can be submitted by way of Khadi and Village Industries Commission web page. The interest price is 11-12 per cent.
Banks had sanctioned and disbursed loans to 84,793 micro-units in FY21, thereby enabling employment for about 6,78,344 men and women against the target of assisting 78,625 entrepreneurs and producing estimated employment for 6,29,000 men and women throughout the monetary year. “This is the best performance under PMEGP since its inception in 2008-09. Thus, the target fixed under PMEGP for the year 2020-21 has been surpassed despite COVID 19 challenges,” MSME Minister Narayan Rane had stated sharing the information in reply to a query in the Rajya Sabha in July this year.
Credit Linked Capital Subsidy Scheme (CLCSS)
What’s the scheme: CLCSS is categorically focused on assisting micro and smaller enterprises (MSEs) to upgrade their technologies for improved production. The scheme is applicable for companies operating in the specified 51 sectors beneath the scheme such as prepared-made garments, biotech sector, cosmetics, steel furnishings, pharma, meals processing, leather, and more. The eligible enterprises could be into khadi units, village units, coir industrial units, units led by females entrepreneurs, and so forth.
Credit limit and how to apply: For technologies upgradation, the scheme enables capital subsidy of 15 per cent of investment in machinery (on institutional finance of up to Rs 1 crore availed by MSEs. The maximum subsidy to be offered is Rs 15 lakh. Businesses can apply on line by way of lending institutions that would upload the applications to the attached nodal agency. The agency would then suggested the application to the Office of the Development Commissioner (DC) MSME to provide the necessary subsidy. Funds would then be transferred to the agency that will forward the quantity to the lender from exactly where the MSE is operating its account. Importantly, a Special Credit Linked Capital Subsidy Scheme (SCLCSS) was also launched beneath the National SC-ST Hub to provide a 25 per cent subsidy to enterprises run by scheduled caste or scheduled tribe entrepreneurs.
According to the information from the government’s MSME Dashboard, 15,213 units had been supported with a subsidy of Rs 1,102 crore in FY21 in comparison to 7,840 units supported with Rs 546 crore subsidy in FY20. In FY22 so far, 1,800 units have currently been supported with a subsidy of Rs 106 crore.
PSB Loans in 59 Minutes
What’s the scheme: The scheme to provide in-principle approval to a loan application in 59 minutes is an initiative by the Small Industries Development Bank of India (SIDBI) and launched by Prime Minister Narendra Modi in November 2018. It enables term loans and working capital loans, and so forth., for MSMEs to buy plant and machinery, technologies upgrade, item expansion, buy of raw supplies, infrastructure development, and so forth. The disbursement period is typically seven-eight days though the interest price begins from 8.50 per cent.
Credit limit and how to apply: Loan ranges from Rs 1 lakh to Rs 5 crore by way of the 59-minute scheme. Applicants have to register on the PSB loans web page, develop a profile, provide necessary monetary particulars of the organization and bank particulars, and then pick preferred bank and branch from exactly where they want to get the loan. Importantly, as per the scheme’s particulars, for getting the in-principle approval, the borrower will be charged Rs 1,000 excluding GST. The want for collateral is as per the lender’s discretion.
The quantity of applications sanctioned by way of PSB loans in 59 minutes grew from 2,12,091 involving Rs 66,991 crore till August-finish last year, to 2,34,905 loans involving Rs 78,409 crores as of September 30, 2021. Similarly, the applications disbursed had elevated from 1,96,473 involving Rs 54,545 crores to 2,18,977 applications in August last year involving Rs 64,067 crores.
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Stand-Up India
What’s the scheme: Launched in April 2016 to increase entrepreneurship amongst females entrepreneurs and scheduled caste/scheduled tribe (SC/ST) entrepreneurs, the scheme aims to facilitate bank loans to at least one SC/ST borrower and females borrower per bank branch for setting up a greenfield enterprise in manufacturing, services, agri-allied, and trading sector. Greenfield ventures are referred to as the initial-time ventures of the entrepreneur in the respective sector. In case the venture is not an person enterprise, the borrower must have at least a 51 per cent controlling stake.
Credit limit and how to apply: Composite loans ranging from Rs 10 lakh to Rs 1 crore can be applied beneath the scheme for setting up a new venture. The size of the loan would be 85 per cent of the project expense. In case, the borrower’s contribution along with the assistance from any other scheme exceeds 15 per cent of the project expense, the scheme would not apply for the borrower. Importantly, banks may perhaps seek collateral safety in addition to principal safety as per their discretion. The repayment period is of seven years with a moratorium period of up to 18 months. The loan can be applied at the companion bank’s branch or by way of the Stand-Up India web page.
So far, more than 1.40 lakh applications involving Rs 33,359 crore have been received of which 1.22 lakh applications involving Rs 27,535 crore had been sanctioned by way of 367 lenders, as per the information from the standupmitra.in. As of now, the scheme is valid till 2025.