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NEW DELHI: The government revealed on Wednesday a significant dose of reinforcement involving a series of initiatives for micro, small and medium-sized enterprises, including automatic unsecured loans worth Rs 3 lakh crore for companies.
A subordinated debt of Rs 20,000 crore for stressed units, a Fund of funds for the injection of capital of Rs 50,000 crore, and the revision in the definition of MSMEs are among the steps announced by the government to help MSMEs to recover from disruptions caused by the coronavirus emergency shutdown.
The MSMEs sector employs 11 million crore, comprising 45 percent of the country’s manufacturing production, 40 percent of exports, and almost 30 percent of GDP.
The sector has been greatly affected by the blockade due to the coronavirus pandemic, with millions of units looking at the possibility of closure and the threat of job losses.
To provide much-needed liquidity to millions of units in distress, battling the impact of the coronavirus pandemic, central government MSME accounts receivable and CPSEs will be released in 45 days, said Finance Minister Nirmala Sitharaman, announcing relief measures at a conference here. .
As part of the Rs 20 lakh crore financial package announced by Prime Minister Narendra Modi, automatic unsecured loans worth Rs 3 lakh crore will be sanctioned for companies.
To this end, an emergency credit line was introduced for banks’ MSMEs and NBFCs up to 20 percent of total outstanding credit as of February 29, 2020, for borrowers with up to Rs 25 million pending rupees and Rs 100 million eligible rupees.
By virtue of this, the loans will have a term of four years with a moratorium of 12 months on the repayment of the principal.
Loan interest will be capped, with 100% credit guarantee coverage for banks and NBFCs on principal and interest. The scheme may be available until October 31, 2020. There will be no warranty fee or new warranties. As a result, 45 lakh units can resume business and safeguard jobs.
The government will also facilitate a provision of Rs 20,000 crore as subordinated debt for operating MSMEs that have become stressed or are not productive (NPA), a move that is expected to benefit two lakh units.
Sitharaman said that the definition of MSMEs has been changed to allow units with an investment of up to Rs 1 million to be called micro-units instead of Rs 25 lakh now.
Additionally, units with a turnover of up to Rs 5 million would be called micro-units, he said, adding that a billing-based approach is being introduced to define small businesses.
Investment and turnover limits for small businesses have been raised to Rs 10 million and Rs 50 million, respectively.
Units with an investment of up to Rs 20 million and a turnover of up to Rs 100 million will qualify as medium-sized companies.
The limits have been raised to allow MSM to retain tax and other benefits.
MIPYME Minister Nitin Gadkari praised the initiatives.
“The government’s historic steps towards Atmanirbhar Bharat in strengthening MSMEs, which are the backbone of the country’s economy,” he said in a tweet.
“A foundation for a new MSMEs sector has been established at the center of our future self-sufficient economy. Targeting large capital inflows to MSMEs is the first step,” Gadkari said in another tweet.
Under the revised definition, the distinction between the manufacturing and service sectors will be removed.
Furthermore, to eliminate “unfair competition” from foreign companies facing Indian MSMEs, global tenders will be rejected in government procurement tenders of up to Rs 200 million, a move aimed at building a “self-sufficient” India.
The infusion of Rs 50,000 crore to MSMEs through a Fund of Funds will be operated through a Mother Fund and few secondary funds, which will help expand the size and capacity of MSMEs.
For this purpose, a Corpus Fund of Rs Rs 10 billion will be established to provide capital funds for MSMEs with potential for growth and viability.
The structure of the fund will help leverage Rs 50 billion of funds at the secondary fund level and will also help expand the size and capacity of MSMEs, while encouraging them to be listed on the stock exchanges.
E-market linkage will also be promoted for MSMEs to act as a replacement for fairs and exhibitions, and Fintech will be used to improve transaction-based lending using data generated by the e-market.
MSMEs are critical to job preservation and growth; Starting up the MSMEs sector is the surest way to accelerate job creation, said Arun Kumar, President and CEO of KPMG India.
The finance minister’s plans announced on Wednesday will provide relief to MSMEs that need immediate help for their survival and will help those companies that need a stimulus to grow.
Kumar affirmed that expanding the definition of MSMEs and introducing new thresholds based on staff turnover while raising the maximum investment limits for each segment.
The general focus on improving liquidity is timely, including measures for NBFCs, HFCs and MFIs and those in the electricity sector to alleviate the situation of distribution companies and independent energy producers with liquidity problems.
Kumar commented that these measures to ease liquidity for lenders and companies will make a tangible difference.
On video: FM Sitharaman in the economic package of Rs 20 lakh crore from the Center: key points
A subordinated debt of Rs 20,000 crore for stressed units, a Fund of funds for the injection of capital of Rs 50,000 crore, and the revision in the definition of MSMEs are among the steps announced by the government to help MSMEs to recover from disruptions caused by the coronavirus emergency shutdown.
The MSMEs sector employs 11 million crore, comprising 45 percent of the country’s manufacturing production, 40 percent of exports, and almost 30 percent of GDP.
The sector has been greatly affected by the blockade due to the coronavirus pandemic, with millions of units looking at the possibility of closure and the threat of job losses.
To provide much-needed liquidity to millions of units in distress, battling the impact of the coronavirus pandemic, central government MSME accounts receivable and CPSEs will be released in 45 days, said Finance Minister Nirmala Sitharaman, announcing relief measures at a conference here. .
As part of the Rs 20 lakh crore financial package announced by Prime Minister Narendra Modi, automatic unsecured loans worth Rs 3 lakh crore will be sanctioned for companies.
To this end, an emergency credit line was introduced for banks’ MSMEs and NBFCs up to 20 percent of total outstanding credit as of February 29, 2020, for borrowers with up to Rs 25 million pending rupees and Rs 100 million eligible rupees.
By virtue of this, the loans will have a term of four years with a moratorium of 12 months on the repayment of the principal.
Loan interest will be capped, with 100% credit guarantee coverage for banks and NBFCs on principal and interest. The scheme may be available until October 31, 2020. There will be no warranty fee or new warranties. As a result, 45 lakh units can resume business and safeguard jobs.
The government will also facilitate a provision of Rs 20,000 crore as subordinated debt for operating MSMEs that have become stressed or are not productive (NPA), a move that is expected to benefit two lakh units.
Sitharaman said that the definition of MSMEs has been changed to allow units with an investment of up to Rs 1 million to be called micro-units instead of Rs 25 lakh now.
Additionally, units with a turnover of up to Rs 5 million would be called micro-units, he said, adding that a billing-based approach is being introduced to define small businesses.
Investment and turnover limits for small businesses have been raised to Rs 10 million and Rs 50 million, respectively.
Units with an investment of up to Rs 20 million and a turnover of up to Rs 100 million will qualify as medium-sized companies.
The limits have been raised to allow MSM to retain tax and other benefits.
MIPYME Minister Nitin Gadkari praised the initiatives.
“The government’s historic steps towards Atmanirbhar Bharat in strengthening MSMEs, which are the backbone of the country’s economy,” he said in a tweet.
“A foundation for a new MSMEs sector has been established at the center of our future self-sufficient economy. Targeting large capital inflows to MSMEs is the first step,” Gadkari said in another tweet.
Under the revised definition, the distinction between the manufacturing and service sectors will be removed.
Furthermore, to eliminate “unfair competition” from foreign companies facing Indian MSMEs, global tenders will be rejected in government procurement tenders of up to Rs 200 million, a move aimed at building a “self-sufficient” India.
The infusion of Rs 50,000 crore to MSMEs through a Fund of Funds will be operated through a Mother Fund and few secondary funds, which will help expand the size and capacity of MSMEs.
For this purpose, a Corpus Fund of Rs Rs 10 billion will be established to provide capital funds for MSMEs with potential for growth and viability.
The structure of the fund will help leverage Rs 50 billion of funds at the secondary fund level and will also help expand the size and capacity of MSMEs, while encouraging them to be listed on the stock exchanges.
E-market linkage will also be promoted for MSMEs to act as a replacement for fairs and exhibitions, and Fintech will be used to improve transaction-based lending using data generated by the e-market.
MSMEs are critical to job preservation and growth; Starting up the MSMEs sector is the surest way to accelerate job creation, said Arun Kumar, President and CEO of KPMG India.
The finance minister’s plans announced on Wednesday will provide relief to MSMEs that need immediate help for their survival and will help those companies that need a stimulus to grow.
Kumar affirmed that expanding the definition of MSMEs and introducing new thresholds based on staff turnover while raising the maximum investment limits for each segment.
The general focus on improving liquidity is timely, including measures for NBFCs, HFCs and MFIs and those in the electricity sector to alleviate the situation of distribution companies and independent energy producers with liquidity problems.
Kumar commented that these measures to ease liquidity for lenders and companies will make a tangible difference.
On video: FM Sitharaman in the economic package of Rs 20 lakh crore from the Center: key points
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