MSME – Benefits and Atmanirbhar Bharat

Vision of Atmanirbhar Bharat or Self-Reliant India

About the scheme:

During the COVID-19 pandemic, when the economy of India has come to a standstill and the GDP has reduced to 1.2% for the FY 2020-21, the Government has initiated the Atmanirbhar Bharat Scheme to stabilize the economy of the country to safeguard the economic interests of people. Finance Minister, Nirmala Sitharaman, announced the plan after the Prime Minister of India, Mr. Narendra Modi laid down a comprehensive package of Rs. 20 lakh crores to enhance the economic situation of the country catering to MSME registration and other industries.

Features of Atmanirbhar Bharat Scheme

• It will enable MSMEs for long term, profitability, sustainability, and priority.
• The five pillars of this scheme are Vibrant Demography, Economy, System, Infrastructure, and Demand.
• Changes in sectors like MSME registration, infusion in liquidity, and direct cash transfers for the poor.
• Making MSMEs globally competitive and extremely attractive.
• A special package of Rs 20 lakh crores to be allocated for the betterment of the economy which is equal to 10% of India’s GDP.
• A bold step to change reforms to make people and the economy self-reliant rather than depending on other countries for success and business.
• To be local for home-grown products and local made things and making hem global.

Why choose MSMEs?

Atmanirbhar Bharat Abhiyan has specifically taken care of MSMEs and their betterment in this crucial time to:

 

• Provide collateral free loans from the Banks – CGS – The Credit Guarantee Fund Scheme was launched for MSMES to make provisions for a collateral free credit or loan to these industries both new MSMES and existing ones. The Ministry of MSME collaborated with SIDBI – Small Industries Development Bank of India and came up with CGTMSE – Credit Guarantee Fund Trust for Micro and Small Enterprises to provide credit without any collateral.

 

• To protect them against delayed payments and bad debts – The normal time frame to make a payment due to a MSME is 45 days which starts from the day of accepting the order. In case of non-payment within the stipulated time, the defaulter will have to pay a compound interest on the debt amount till the agreed date or till 15 days of acceptance of the product.

RBI has notified that the penalty charges for a delayed payment to a MSME will be 3 times the normal rate followed by banks. It is also imperative to report tax audits along with the non-allowance of interest paid under Income Tax.

 

• To provide a credit linked capital subsidy scheme – This scheme enables MSMES to be technologically upgraded and updated. This makes them replace their old tools, obsolete technology, and replace them with modernized techniques and tools. A capital subsidy will be provided to MSMES which they can directly obtain by approaching banks.

 

• For Incubation – This scheme promotes new start-ups, new ideas designs, technology, products, and the Government assists MSMEs with 75 – 80% of the entire cost of the project of renovation and reestablishment. This boosts innovators of MSMEs and helps them to urbanize their respective industries.

 

• Bank Interest – To provide a better service to the MSME Sector, the Government of India has permitted public sector banks to advance 60% or more to MSMEs. Interest rates are also much lower for registered MSMEs in comparison to other industries.

Decisions taken by the Government of India for the growth of MSME Sector under the Atmanirbhar Bharat Abhiyan

Collateral-free Automatic MSME Loans for Businesses – Rs 3 lakh crores

Features:

• Emergency Credit of up to 20% of entire outstanding credit is offered to MSMEs by banks and NBFCs.
• Borrowers who currently have an outstanding of Rs. 25 crores and a turnover of Rs. 100 crores are eligible.
• MSME Loans have a moratorium of 12 months and a 4-year tenor on Principal repayment.
• Interest will be capped.
• 100% credit guarantee cover to Banks and NBFCs on all lending.
• The scheme is available till 31st Oct 2020.
• No guarantee fees.
• No fresh collateral.
• 45 lakh units can start business activity and safeguard jobs.

Subordinate Debt for Stressed MSME Registration – Rs. 20000 crores

Features:

• Stressed MSMEs need equity support.
• 20,000 crores is given as subordinate debt.
• An estimate of Rs 200000 is given as benefit to MSMEs.
• Functioning MSMEs (NPA) or stressed MSMEs are also eligible for the debt.
• Allocation of Rs. 4,000 Cr. to CGTMSE Credit Guarantee support (providing a partial guarantee through MSMEs) to banks.
• Promoters of MSME are eligible for debt which will further be pervaded as equity in the Unit.

Equity Infusion for MSMEs – Rs. 50000 crores

Features:

• For MSMEs undergoing a huge shortage of equity.
• Fund of funds amounting to Rs 10,000 crores will be set up to be operated through mother and a few daughter funds.
• Equity funding for MSMEs who have a good potential for viability and growth.
• Fund structure of Rs 50,000 crores at the level of daughter funds.
• Will expand MSME size as well as capacity and encourage them to be on the main board of Stock Exchanges.

New Definition of MSMEs

Features:

It is fearful to see a Low threshold in MSME definition and thus the growth stops due to which the definition of MSMEs has been transformed

• Definition of MSME Registrations will be revised.
• Enhanced limit of Investment to be revised.
• Introduction of Additional turnover criteria.
• Elimination of the Difference between manufacturing and service sector.

 

Existing Classification of MSMEs
Criteria – Investment in Equipment or Plant & Machinery
Classification	Micro	Small	Medium
Manufacturing Enterprises	Investment less than Rs. 25 lakhs	Investment less than Rs. 5 crores	Investment less than Rs. 10 crores
Services Enterprises	Investment less than Rs. 10 lakhs	Investment less than Rs. 2 crores	Investment less than Rs. 5 crores

 

Revised MSME classification
Composite Criteria – Annual Turnover and Investment
Classification	Micro	Small	Medium
Services and Manufacturing	Turnover less than Rs. 5 crores And Investment less than Rs. 1 crore	Turnover less than Rs. 50 crores And Investment less than Rs. 10 crores	Turnover less than Rs. 100 crores And Investment less than Rs. 20 crores

 

Global Tenders to be forbidden upto Rs. 200 crores

Features:

• To curb the international competition, global tenders up to Rs. 200 crores will be banned.
• Will realize the amendments of General Financial Rules.
• This will make India Self-Reliant and support Make in India.
• This will also assist MSMEs to enhance their business.

Some of the Relaxation and Benefits announced by the Finance Minister:

Measures by Reserve Bank of India

RBI – The Reserve Bank of India will make the following changes to enhance the cash liquidity in the market:

• Beneficial refinance facilities to be provided for SIDBI, NABARD, and the NHB for Rs. 50,000 crores at the policy repo rate.
• Moratorium of 3 months on payment of instalments and interest regarding all term MSME loans.
• Reduction in CRR – Cash Reserve Ratio which will lead to a liquidity enhancement of Rs. 1,37,000 crores.
• Liquidity facility of Rs. 50,000 crores for mutual funds to mitigate liquidity pressures.
• TLTROs – Targeted Long-Term Repo Operations of Rs. 1,00,050 crores for fresh placement in commercial paper, investment grade corporate bonds, and non-convertible debentures.
• Extension of DCCO – date for commencement for commercial operations by one year for MSME loans by NBFCs to commercial real estate sector.
• limit for overnight borrowing, under MSF – marginal standing facility increased to Rs 1,37,000 crores at a reduced MSF rate.
• Reduction of margins related to Working Capital Financing.

Thus, the initiative taken by the Government during such a crucial time where the pandemic has taken everything by a storm, is highly appreciated and welcomed by the masses. This will help MSMEs develop and revamp their businesses, eventually helping the growth of the country’s GDP and per capita income. Introducing such a scheme seems to be the need of the hour for industrialists and businessmen to work with the support of the Government towards their own growth and the nation’s economic health.