The central government on Wednesday announced six reforms to prop up the Micro, Small and Medium Enterprises (MSMEs) — considered the backbone of India’s economy—hit by the economic slump triggered by the coronavirus outbreak. The finance minister while announcing the reforms claimed the changes were aimed to make the Indian economy self-reliant. Here are the six reforms or measures announced by the finance minister.
1. Collateral free automatic loan for SMEs up to 3 lakh crore which means not a single MSME unit needs to pay any collateral or guarantee for the loans availed under this scheme. They will also not be required to pay any principal component of the loan for the first year. The tenure of the loan will be for 4 years. This will benefit 45 lakh units resume business activities and safeguard jobs, said the FM.
2. Rs 20,000 crore subordinated debt for stressed MSMEs facing an equity problem. It will help functioning MSMEs which are either NPA (non performing assets) or are economically stressed. Around Rs 2 lakh MSMEs qualify under this category. The government will provide Rs 4,000 crore partial credit guarantee support to banks and promoters of the MSMEs will be given debt by banks in the form of equity infusion.
3. Fund of fund for the infusion of Rs 50,000 crore as equity into MSMEs. This will benefit MSMEs with potential and viability by providing them greater support in capacity expansion and for the purpose of market-listing. This will cover MSMEs that are performing very well and can use the opportunity to expand.
4. The definition of MSME is being changed to encourage MSMEs to grow bigger without losing on the benefits availed by MSMEs. The investment limit that defined an MSME is being revised upwards along with the addition of turnover as criteria to categorise MSMEs. In add