Government relief for MSMEs: change in definition, refund of contributions, unsecured loans announced

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NEW DELHI: Finance Minister Nirmala Sitharaman on Wednesday announced a series of measures to rescue struggling micro, small and medium-sized enterprises (MSMEs) in the country, including unsecured loans of up to Rs 3 lakh crore backed by the government guarantee, reimbursement of MSME contributions in the next 45 days, change of definition of these companies among others.

For Business and MSME Emergency Line of Credit from Banks and NBFCs up to 20% of total outstanding credit as of 29.2.2020, and borrowers up to Rs. 25 crore outstanding and Rs 100 crores of turnover will be eligible. The loans will have a four-year term with a 12-month moratorium on principal repayment.

Addressing a press conference to explain the Rs 20 lakh crore stimulus package announced by Prime Minister Narendra Modi on Tuesday, Finance Minister Nirmala Sitharaman announced the establishment of a fund of funds with a corpus of Rs 10 000 crores which will provide equity financing to growing MSMEs with potential and viability.

Responding to a long-standing request from the MSME sector, Sithraman announced a change in the definition of MSME, bringing in an additional criterion related to turnover.

“The distinction between manufacturing and service MSMEs is being removed. They should all be defined in the same way,” Sitharaman said.

Manufacturing and service companies with investments up to Rs 1 crore and turnover of Rs 5 crore will be classified as small, investments up to Rs 10 crore and turnover up to Rs 50 crore will be micro, while companies with an investment of up to Rs 20 crore and a turnover of Rs 100 crore will be classified as medium-sized companies, under the revised definition.

“MSME claims on Indian government and CPSEs will be released in 45 days,” Sitharaman said.

The government will facilitate the provision of Rs. 20,000 cr in the form of subordinated debt, of which two lakh stressed should benefit MSMEs, Sitharaman said. Sitharaman also said that global tenders will be refused in public tenders up to Rs 200 crore, to help MSMEs provide a level playing field.

“The majority of MSMEs have not been able to supply (to these tenders) as conditions have become unmatched for MSMEs,” Sitharaman said. Sitharaman also called for promoting e-marketplace linkages for MSMEs to replace trade fairs and exhibitions.

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