easy access to finance through interest subvention scheme
•
0 likes•86 views
Finance serves as the fresh blood of business essential for its smooth running, as almost 90% among Micro, Small and Medium Enterprises sector belongs to Micro Enterprises, the government has attempted to provide financial assistance for their steady growth through the Interest Subvention Scheme introduced in 2018. It is the subset of loan schemes available for MSME proclaimed by the government so as to assist the business that is the heart and soul of the nation’s economy.
Recommended
Recommended
More Related Content
More from CA. (Dr.) Rajkumar Adukia
More from CA. (Dr.) Rajkumar Adukia (20)
easy access to finance through interest subvention scheme
- 1. EASY ACCESS TO FINANCE THROUGH THE INTEREST SUBVENTION SCHEME By CA. DR. Rajkumar S Adukia Ph.D, LL.B, LLM (Constitution), FCA,FCS, MBA, MBF ,FCMA,Dip Criminology, Dip in IFR(UK) Justice (Harvard) , CSR, Dip IPR, Dip Criminology ,dip in CG , Dip Cyber, dip data privacy B.Com.,M.Com.,Dip LL & LW Reachable at 9820061049/ drrajkumarsadukia@gmail.com EVER ENTHUSIASTIC AND PASSIONATE TO ASSIST EVERYONE THOSE LOOKING GUIDANCE Page 1
- 2. Introduction: The MSME stands for Micro, Small and Medium Enterprises is one of the prime sectors that is responsible for employment generation after agriculture. With a total strength of 6.3 crore of enterprises, the sector has managed well in anticipating promising future of nation as world’s leading economy. On that note the government has seen making constant efforts in terms of boosting the growth of MSME but the question is who are MSMEs. The sector is regulated by the central legislation namely Micro, Small and Medium Enterprises Development Act, 2006 under which section 7 provides for the classification of enterprises into Micro, Small and Medium. As per the latest criteria effective from 1 st July 2020 the entities with an investment of up to Rs 1 crore and turnover of up to Rs 5 crore are classified as micro ; investment of up to Rs 10 crore and turnover of up to Rs 50 crore are classified as small , and investment of up to Rs 50 crore and turnover of up to Rs 250 crore are classified as medium . With the recent circular of 2 nd July 2021 the government has now decided to include retail and wholesale trade under the criteria of MSME. Consequently it has now opened the door for such retail and wholesale trade entities to avail benefits of MSME including the priority sector lending policy of Reserve Bank of India. Since the most of MSME are located in rural part of country there are quite hurdles that they have to face almost 90% of this MSME Sector is comprise of Micro enterprises, whose potentials are always restricted due to certain factors such lack of market reach, technical expertise, effective communication, finance. Page 2
- 3. As an attempt of smooth running of such enterprises the government has come up with the scheme called Interest Subvention Scheme through Reserve Bank of India. What is Interest Subvention Scheme? The Interest Subvention Scheme for MSMEs was firstly introduced in 2 nd November 2018; however it was formulated only for the scheduled commercial banks. Later the government widen the financial access to MSMEs it introduced the Interest Subvention Scheme for MSMEs – Co-operative banks . Now the scheme envisages co-operative banks in addition to the schedule commercial banks as the “Eligible Lending Institutions” effective from 3 rd March 2020. When we use word “subvention” we imply the assurance of financial support. The scheme provides relief up to 2% of interest on all MSMEs outstanding fresh/incremental term loan/working capital till the period of its validity. The scheme was extended up to 31 st march 2021. With respect to working capital and term loan it is limited up to 100 lakhs. MSMEs with Udyog Aadhar Registration no. / Udyam Registration and Valid GSTN Number are eligible to avail the benefit of interest subvention scheme. One may not confused with Udyog Aadhar Registration and Udyam registration the later is merely an updated version of the former with more simple process of registration of MSME with the features such as single window registration with paperless, free and efficient process. The Udyam registration https://udyamregistration.gov.in/Government-India/Ministry-MSME-registratio n.htm was introduced on 26 th June 2020 with effect from 1 st July 2020 providing mandatory registration of new enterprises and re-registration of already Page 3
- 4. registered MSMEs who were registered under Udyog Aadhar Registration scheme. It should be noted the units with GST number are dispensed with the requirement of Udyam Registration Number. Also as an alternate such units may apply an Income Tax Permanent Account Number (PAN) or the lending institution may recognised their loan account as MSME. The only exception is that the MSMEs already availing the interest subvention under any of the central/state scheme shall not be eligible under the present scheme. Additonlay it must be noted the in any case the loan account shall be declared as non performing asset. The major core of the scheme is that 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. Small Industries Development Bank of India (SIDBI) shall act as a Nodal Agency for the purpose of channelizing of interest subvention to the various lending institutions through their Nodal office and all the eligible lending institutions required submit there half yearly claims to SIDBI in the format provided under Annexure I https://rbidocs.rbi.org.in/rdocs/content/pdfs/ISS07102020_A1.pdf The scheme was an sheer attempt of briding the gap of financial assistance to MSMEs as well as improving upon the ease of doing business. The successful implementation of the scheme is supported with the fact that our country has Page 4
- 5. managed to reach 63 rd position in World Bank’s Ease of Doing Business ranking 2020. The scheme has aniticipated the future of benfiting the weaker parts of MSMEs contributing to further expansion of sector. The interest subvention scheme for MSMEs is perhaps the subset of loan scheme available for MSME proclaimed by the government so as to assit the buisness that are heart and soul of nation’s economy. Such other MSME loan facilities envisaged under different schemes particularly Mudra loan scheme, the Credit Guarantee Funds Trust for Micro and Small Enterprises or the Prime Minister Employment Generation Programme. What all those scheme offers to MSMEs? 1. MUDRA : It stands for Micro Unit Development and Refinance Agency loan available in three division depending upon the limit of loan offerings. - Shisu Loan - Amount of Loan below Rs 50,000. - Kishore Loan - Amount of Loan above Rs 50,000 and should be below Rs 5,00,000. - Tarun Loan - Amount of Loan above Rs 5,00,000 and should be below Rs 10,00,000. 2. The Credit Guarantee Funds Trust for Micro and Small Enterprises : The scheme offers a Collateral free loan up to a limit of ₹ 100 lakh is available for individual MSE on payment of guarantee fee to bank by the MSE for both existing and new enterprises. It offers credit to micro and small enterprises without any security or third party guarantee. The trust is created by the m/o MSME and SIDBI and about 133 eligible Lending Institutions registered as MLIs of the Trust, comprising of 26 Public Sector Banks, 21 Private Sector Banks, 73 Regional Rural Banks (RRBs), Page 5
- 6. 4 Foreign Banks and 9 other institutions i.e. Delhi Financial Corporation, Kerala Financial Corporation, Jammu & Kashmir Development Finance Corporation Ltd, Andhra Pradesh State Financial Corporation, Export Import Bank of India, The Tamil Nadu Industrial Investment Corporation Ltd., National Small Industries Corporation (NSIC), North Eastern Development Finance Corporation (NEDFI) and Small Industries Development Bank of India (SIDBI) 3. The Prime Minister Employment Generation Programme : The scheme contemplates the idea of buisness opportunities to the young Page 6
- 7. unemployed. Intiated with the merger of Prime Minister Rojgar Yojana (PMRY) and the Rural Employment Generation Programme (REGP) . It provides loan facility between 9.5 to 23.75 lakh and bare the project cost up to 25 lakh for manufacturing sector however for buisness/service sector it limit to 10 lakh. Hope you find this article informative, we at Adukia Law Chambers provide all kinds of guidance, assistance from prospective entreprenuers to the existing one in term of legal and financial consultancy. You may reach out to us on 9820061049 or write us at drrajkumarsadukia@gmail.com Thank you! Page 7