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Govt nods Rs 20,000 cr support for stressed MSMEs, Rs 50K cr equity infusion

Source: PTI
June 01, 2020 23:57 IST
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The approval for provisioning of Rs 20,000 crore as subordinate debt to provide equity support will benefit 2 lakh stressed MSMEs.

MSMEs

Illustration: Dominic Xavier/Rediff.com

The government on Monday approved provisioning of Rs 20,000 crore as subordinate debt to provide equity support to stressed MSMEs and proposed equity infusion of Rs 50,000 crore for units through a Fund of Funds as part of the roadmap to implement the package announced for the sector.

The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi also cleared the upward revision of the definition of micro, small and medium enterprises (MSMEs).

 

It cleared enhancing the turnover limit for classifying units as "medium" units to Rs 250 crore from Rs 100 crore announced last month along with the package for the sector.

The CCEA also decided that the turnover with respect to exports will not be counted in the limits of turnover for any category of MSME units whether micro, small or medium, MSME Minister Nitin Gadkari told reporters after the Cabinet meeting.

The approval for provisioning of Rs 20,000 crore as subordinate debt to provide equity support to the stressed MSMEs will benefit 2 lakh such MSMEs, Gadkari said.

Besides, equity infusion of Rs 50,000 crore for MSMEs through Fund of Funds will establish a framework to help MSMEs in capacity augmentation and also provide an opportunity to them to get listed in stock exchanges.

A fund of funds with corpus of Rs 10,000 crore will be set up, which will be operated through a mother fund and few daughter funds.

The fund structure will help leverage Rs 50,000 crore of funds at daughter funds level, Gadkari said, adding that he hopes this "revolving fund" will multiply in value terms significantly in the coming years.

"With today's approval, implementation Modalities and Road Map for entire components of the Atamnirbhar Bharat Abhiyan package are in place.

“This will help in attracting investments and creating more jobs in the MSME sector," an official statement said.

In another significant decision, the Cabinet cleared a scheme under which street vendors can avail a working capital loan of up to Rs 10,000, repayable in monthly instalments in the tenure of one year.

The scheme -- PM SVANidhi -- is likely to benefit about 50 lakh people, including vendors, hawkers, thelewalas, and rehriwala.

Information and Broadcasting Minister Prakash Javadekar said the Ministry of Housing and Urban Affairs has launched a Special Micro-Credit Facility Scheme - PM SVANidhi - PM Street Vendor's AtamNirbharNidhi, for providing affordable loans to street vendors.

This scheme will go a long way in enabling them to resume work and earn livelihoods, he said, and added it for the first time that street vendors have become beneficiaries of an urban livelihood programme.

Javadekar said vendors can avail a working capital loan of up to Rs 10,000, which is repayable in monthly instalments in the tenure of one year.

On timely/ early repayment of the loan by vendors, an interest subsidy of 7 per cent will be credited to the bank accounts of beneficiaries through Direct Benefit Transfer on six monthly basis.

Also, there will be no penalty on early repayment of loan.

The scheme provides for escalation of the credit limit on timely/ early repayment of loan to help the vendor achieve his ambition of going up on the economic ladder.

Also, it is for the first time that MFIs/ NBFCs/ SHG Banks have been allowed in a scheme for the urban poor due to their ground level presence and proximity to the urban poor including street vendors.

After the MSME package announcement on 13 May, 2020, there were several representations that the announced revision is still not in tune with market and pricing conditions and it should be further revised upwards.

Keeping in mind these representations, it was decided to further increase the limit for medium manufacturing and service units. Now it will be Rs 50 crore of investment and Rs 250 crore of turnover, the statement said.

In the package announcement, the definition of micro manufacturing and services unit was increased to Rs 1 crore of investment and Rs 5 crore of turnover.

The limit of small unit was increased to Rs 10 crore of investment and Rs 50 crore of turnover.

Similarly, the limit of a medium unit was increased to Rs 20 crore of investment and Rs 100 crore of turnover.

The revision in definition of MSME has been done after 14 years since the MSME Development Act came into existence in 2006.

In the aftermath of COVID-19 pandemic, the government announced a Rs 20 lakh crore package to help revival of economic activities.

To provide immediate relief to MSME sector, a Rs 3 lakh crore collateral free automatic loan was also announced for them.

Besides, amendments have been made in General Financial Rules to disallowing global tenders in procurement up to Rs 200 crores- to create more opportunities for domestic players.

To further ease the burden on MSMEs, RBI has extended moratorium on repayment of loans for another three months.

There are over 6 crore MSMEs across the country, which contribute 29 per cent to the GDP and almost half of the exports.

These units employ more than 11 crore people.

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