MSMEs have been hit by COVID-19 and are currently resolving small hiccups to restart the business. Honourable Finance Minister recently announced measures to boost liquidity in MSMEs, help them take benefit of the Government schemes, and strengthen their competencies. The following are recent relief for Aatmanirbhar MSMEs.
Collateral-free loans of ₹ 3 Lakh Crore to MSMEs: Banks and NBFCs will offer up to 20 per cent of entire outstanding credit as on February 29, 2020, to MSMEs. Units with up to ₹ 25 Crores outstanding credit and ₹ 100 Crores turnover are eligible for taking these loans that will have four-year tenor with a moratorium of 12 months on principal payment. The arrangement can be profited till October 31, 2020. The Government will provide a complete credit guarantee cover to lenders on the principal and interest amount.
Provision of ₹ 20,000 Crore of Subordinate Debt: The Government will facilitate the provision of ₹ 20,000 Crore as subordinate debt for providing equity support to those MSMEs which are declared NPAs or stressed. The Government will likewise give ₹ 4,000 Crore to Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) that will offer fractional credit ensure backing to banks for loaning to MSMEs. This would profit around two lakh such organisations.
Fund of Funds to be created – ₹ 50,000 Crore Equity infusion: The Government will create Fund of Funds to infuse ₹ 50,000 Crore equity in MSMEs. The fund shall encourage MSMEs to list on stock exchanges.
SME definition revised; benefitting several units: Honourable Finance Minister revised the definition of MSMEs to include more units under it and make them eligible for MSME benefits.Under the new definition, assembling and administration MSMEs will be characterised under a typical metric that will be a blend of interest in plants and apparatus or gear and turnover.Manufacturing enterprises investing less than ₹ 25 Lakhs, less than ₹ 5 Crores, and less than ₹ 10 Crores in plant and machinery or equipment were till now defined as micro, small and medium enterprises respectively. For services businesses, the investment threshold limit stood at less than ₹ 10 Lakhs, less than ₹ 2 Crores, and less than ₹ 5 Crores were defined as micro, small and medium enterprises respectively.Presently, with the amended definition, joining assembling and administration MSMEs to appreciate same advantages, speculation not exactly ₹ 1 Crores and turnover under ₹ 5 Crores will be characterised as miniature units while private ventures will be classified dependent on venture not exactly ₹ 10 Crores and turnover under ₹ 50 Crores. Medium undertakings will be characterised dependent on venture under ₹ 20 Crores and turnover not exactly ₹ 100 Crores.
Global tenders will be disallowed in the interest of MSMEs: Addressing MSMEs’ issue of unfair competition from foreign companies in Government procurement tenders due to the size and strength differ, the Government has proposed to disallow global tenders in schemes up to ₹ 200 Crores. Honourable Finance Minister has confirmed that global tenders will be banned for Government procurement up to ₹ 200 Crores so that MSMEs can compete and supply in Government tenders. Necessary amendments of General Financial Rules will be effected accordingly.
MSME Dues will be cleared within 45 days: Honourable Finance Minister has assured that the Government and central public sector enterprises will release all pending MSME payments in 45 days. The fintech enterprises will be used to boost transaction-based lending using the data by the e-marketplace. This e-market for creating linkages for MSMEs will be elevated to supplant exchange fairs and displays.
Governance structures, improved credit rating, reduced finance cost, easy finances, and branding are key benefits for listing on the SME platform. Besides, valuation has helped listed SMEs to achieve speedy growth systematically at an early stage of their respective business life cycle. Greater awareness needs to be created and a larger number of industries should be made aware so that the benefits of fundraising through capital markets can be enjoyed by maximum industries.
Founder & CEO| Fox Investor & A.V.A. Taxway Associates- Corporate & Tax Law Firm
Viibhor Agarwal is a Business & Brand Consultant as well as he is a Financial Expert his area of specialization is to guide Entrepreneur, Start-up’s and SME’s to build the brand value of business financially & legally. He has 8 year extensive experience in this sector