In the testing times of COVID-19, the pandemic has put not just the common man but also the common business under the business. With the economy being stressed, a stern economic relief as a way of government intervention is pretty much needed. Damage both financially and mentally or physically needs to be lessened as much as possible. Amidst the many casualties of the global pandemic, the one that has caught the eyeballs of many is how the Micro, Small and Medium Enterprises are going to look beyond and further the pandemic.
What is MSME and the need of the hour?
Micro, Medium and Small-scale Enterprises as the name suggests is the biggest bread earner for the highly labour-intensive industry that it is. At this very minute, MSME’s contribute around 30% of the nation’s GDP with over 11 Cr. people employed in this medium. But the way this lockdown seems to have affected, this industry needs much attention for revival. The MSME exporters are going to face the consequences as the projected decline in the service production is alarmingly huge. An abundance of Informal sector labour in this industry makes it difficult to make an estimate of the economic relief to be provided for the same. The companies face a cash freeze while they still have to pay the statutory fees, pressing creditors, fixed costs along with mere operational costs.
Government providing Financial Support for MSME
The government recently came out in the open by announcing several economic and policy measures as relief specifically for this industry. The RBI even though has announced a moratorium on term loans, eased working capital financing and deferred interest payment on working capital facilities, the real news was when the government announced the 3-lakh crore Aatmanirbhar Economy stimulus package. Even the SIDBI announced that it would pass emergency MSME loans at a concessional rate of 5 % in order to facilitate liquidity at this hour.
The Guaranteed Emergency Loan was passed under this scheme that aims to provide an additional 20% of the loan amount already outstanding to MSME lenders with total borrowings only up to 25 crores
It is a 100% guarantee loan in addition to the one-year moratorium provided. Interest rates under this scheme will be charged at 9.25% in the case of Financial Institutions or Scheduled Banks and 14% in case of an NBFC.
The government has also smartly in fluxed cash into the debt market. A lot of the debt capital was ignored as a result of a lack of confidence in the market. These 30,000 crores investment in the debt market, will help to liquidate debt papers from both primary and secondary market. Small scale NBFC will be able to raise finance which will help the MSME in return.
What loan and where to find a loan?
If you are an MSME that wants to procure raw materials, pay for the initial fees or fixed costs, then going for a loan is a must. Any MSME with a turnover of 100 crores and an already existing loan bill of 25 crores, can avail 20% of the outstanding loan. Unsecured loans are also provided as an aid to MSME. No collateral and concession of 2% interest are provided for loans up to 3 lakh rupees.
The Public sector banks have announced that they will lend up to 20,000 crore loans to MSMEs. This provided the much-needed change in the definition of MSME. GOI has increased the investment bracket and also considered the turnover option to be able to benefit a larger number of MSME while redefining the purview of MSME
A lot of private banks can be an answer to where to find loans. Private banks at the discretion of their own are providing loans up to 5 crores with an average interest rate of around 10% approx. The processing fee varies as per the type of loan one is availing.
Financial Support Schemes in India
GOI has few financial support schemes that are predominantly accessed by the MSME in India. Pradhan Mantri Mudra Yojana Scheme, Emergency Credit Line Guarantee Scheme, Credit Guarantee Funds Trust for Micro and Small Enterprises, Interest Subsidy Certificate, Prime Minister Employment Generation Scheme. These are the scheme under which Loan for Indian MSME is responsibly entrusted. The government is also planning to support the MSME by making a fund of funds of Rs. 50,000 Crore that will influx equity into the small and medium scale industry. This will expand the MSME and eventually hope to get listed on the stock market is viable.
