MSME Loan Scheme 2020

As the Government expands the scope of economic relief package of Rs. 3 Lakh Crore by bringing major relief to the MSME sector, and to individuals who are not registered under MSME Act but availing business loans in their individual capacity. In this crucial time of pandemic, the government has announced the MSME credit Scheme package, which includes:

  1. Business Loan under Individual capacity is allowed
  2. The Eligibility criteria changed as now borrower account having outstanding amount of Rs. 50 crores as on 29.02.2020 (earlier it was Rs.25 Crores)
  3. The limit of Turnover also increased from Rs. 100 Crores to Rs. 250 Crores
  4. Maximum loan amount can avail per unit is Rs. 10 crores (i.e 20 percent of Rs. 50 Crores)

According to the various Banking sources it was concluded that over 80 percent of MSME entrepreneurs are taking business loans in their individual capacity, and they are not registered under MSME Act. As per the eligibility criteria of this Scheme, the enterprise or business should be registered under MSME Act, thereby making most of them ineligible under the scheme. However, the issue raised by banks was accepted by the Finance Ministry for the inclusion of business loan under individual capacity.

Old MSME Definition

Classification

Manufacturing

Services

Micro

Investment < Rs 25 lacs

Investment < Rs 10 lacs

Small

Investment < Rs 5 crore

Investment < Rs 2 crore

Medium

Investment < Rs 10 crore

Investment < Rs 5 crore

 

New MSME Definition after announcement of 13th May 2020

  1. The criterion for classification has been changed to investment and turnover.
  2. The limit of investment has increased so that more MSME’s can avail benefit of this scheme.
  3. The classification criterion is now equal for manufacturing sector and service sector.

Classification

Manufacturing and Services

Micro

Investment < Rs 1 crore and Turnover < Rs 5 crore

Small

Investment < Rs 10 crore and Turnover < Rs 50 crore

Medium

Investment < Rs 20 crore and Turnover < Rs 100 crore

Advantages/Benefits of MSME Loan:

  • For meeting working capital requirement
  • For installation of new plant and machinery
  • For paying overheads
  • For inventory management
  • For consolidating of business debt into one single debt
  • For invest in promotional marketing

POPULAR MSME LOAN SCHEMES:

1. MUDRA LOAN (Micro Unit Development and Refinance Agency)

Under the flagship of Government of India, the “PRADHAN MANTRI MUDRA YOJANA (PMMY), was launched by the honorable Prime Minister to” fund the unfunded” which bring the enterprise to formal financial assistance and extend affordable credit facility. This scheme was introduced to support the small-scale business owners and it is mainly classified into 3 categories:

  • SHISHU : Under this category loan up to 50,000 is allowed
  • KISHORE : Under this category loan from 50,001 to 5,00,000 is allowed
  • TARUN : Under this category loan from 5,00,001 to 10,00,000 is allowed

Note: Maximum loan amount permissible under this scheme is 10,00,000 and maximum repayment tenure for each category is up to 5 year.

The recent Economic package of MSME includes benefits related to Mudra borrowers; Mudra loan holders or any such person who had loan under this scheme on or before 29.02.2020 after meeting eligibility criteria of the scheme and reported on the Mudra portal shall be covered.

Key Features of Mudra Loan:

  • It provides MSME loan without any collateral
  • Processing fee is waived off by the financial institution for mainly Shishu loan.
  • This loan is offered with credit guarantee
  • No third-party security is required
2. PRIME MINISTER’S EMPLOYMENT GENERATION PROGRAMME

Under the flagship of Government of India, “PRIME MINISTER ROJGAR YOJANA” (PMRY) & “THE RURAL EMPLOYMENT GENERATION PROGRAM” (REGP) was launched for employment generation and opportunity to young people of the country who is educated and have a potential to be employed. The Prime Minister’s Employment Generation Programme or PMEGP is an integrated subsidy scheme which is linked to namely, PMRY & REGP.

 

Subsidy and Funding under this scheme:

 

Beneficiary Categories

General

Special

Beneficiary’s Share (of the project cost)

10%

5%

Subsidy Rate (from Government)- Urban

15%

25%

Subsidy Rate (from Government)- Rural

25%

35%

Under this Scheme, the beneficiary has to invest nearly 5-10% of project cost; however, government will grant subsidy of 15-25% of project and the rest of fund will be offered by participating banks.

 

Applicability criteria for availing Prime Minister’s Employment Generation Programme for individuals and organizations:

  • The applicant should be minimum 18 years old
  • The applicant should be 8th grade passed
  • The applicant must be part of self-help group
  • Any society, registered under Societies Act, 1860
  • Charitable trust
  • Production co-operative societies

Key Features of Prime Minister’s Employment Generation Programme

 

  1. In this scheme maximum project cost for manufacturing sector is 25 Lakh and for service sector is 10 Lakh.
  2. This scheme covers all types of industries
  3. Any business unit which already running on government subsidies are not covered under this scheme.
3. CREDIT GUARANTEE TRUST FUNDS FOR MICRO AND SMALL ENTERPRISES

The Credit Guarantee Trust Funds Scheme is launched for the purpose to establish a strong credit relief system which helps to promote better credit flow for MSME sector and to give guarantee to commercial bank for such loan extended by micro and small enterprises. Under this scheme the new and old micro & small enterprises are eligible to get collateral free loan up to Rs. 1 crore which is guaranteed by CGTMSE.


The MSME loans sanctioned by the Member Lending Institution backed this scheme and it provides the guarantee cover for a huge portion of the loan amount. Under this scheme, existing as well as new MSME (including service enterprises) are eligible for a maximum credit cap of Rs. 2 crores.

 

This scheme is offered by:

  1. All Scheduled Commercial Banks
  2. All Regional Rural Banks
  3. National Small Industries Corporation (NSIC)
  4. North Eastern Development Finance Corporation (NEDFi)
  5. Small Industries Development Bank of India (SIDBI)

Key Features of Credit Guarantee Trust Fund scheme:

  • The Annual Guarantee fee is 1.5% and for North–Eastern region including Sikkim is 0.75%
  • The Guarantee coverage is: Upto 50 Lakhs –  Covered 75% of credit facility, 50 Lakh- 1 Crore – covered 50% of credit facility
  • The Credit Guarantee cover can be higher upto 85% for Micro-enterprises upto Rs. 5 Lakh, women-oriented enterprise or north eastern enterprise.

Loan rate comparison statement:

Bank Name

Interest Rate

Bank of Maharashtra

14.50 %

Indian Overseas Bank

14.90 %

Bank of Baroda

14.10 %

PNB

12.65 %

IDBI Bank

12.25 %

Capital First

21.00 %

Bajaj Finserve

18.00 %

IndusInd Bank

14.00 %

HDFC Bank

15.65 %

ICICI Bank

16.49%

Steps to get MSME Loans:

  1. Check the Eligibility criteria mentioned under various schemes of MSME category.
  2. Submit the duly filled Application Form with all the credentials.
  3. Submit the required document such as Identity proof, Resident proof, Age proof and other documents related to Company/Firm such as Incorporation Certificate, MOA & AOA etc. to complete the process.
  4. Get the MSME Loan sanctioned within 1 day only.

Video on MSMEs under Aatmanirbhar Bharat Abhiyaan

  • SALIENT FEATURES OF THE MSME LOAN SCHEME
  • ELIGIBILITY
  • REVISED DEFINITION OF MSME
  • OTHER IMPORTANT MEASURES FOR MSME
  • DOCUMENTS REQUIRED FOR APPLYING MSME LOAN

You can use MSME loan funds for various purpose such as utilizing them for working capital optimization, inventory management and purchase of equipment.

There is no difference between MSME loan and SME loan as MSME stands for micro, small and medium enterprises and SME stands for small and medium enterprises. Sometimes MSME loan termed as SME loans.

Yes, having a good Credit score is always an added advantage for the MSME and for qualifying for its various schemes.

The following key measures were introduced by Government of India under “Atmanirbhar Bharat Abhiyan” or “Self-reliant India” Scheme, 2020

  1. Collateral free loans
  2. 12 months Moratorium period
  3. Manufacturing and service industries are considered as same
  4. 100% credit guarantee provided
  5. 2% interest rate for loan upto 3 Lakh
  6. 10,000 loan offered to pedestrian business person.

The facility of MSME loan is offered/provided by both banks and NBFC’s. This MSME loan can be availed by applying online or through visiting vendor. Compliance of eligibility criteria and providing all the required documents are necessary.

 

This scheme was launched for employment generation and opportunity to young people of the country who is educated and have a potential to be employed. This scheme provides financial assistance to the young people for setting their business platforms.

What’s Included

  • Consultation with our Loan Advisor
  • Complete Assistance in Paperwork
  • Quick loan Disbursal

Documents Required

  • Application Form duly filled with all requisite credentials.
  • Identity Proof: Passport, driving licence, PAN card, Aadhar Card, Voter’s identity card.
  • Residence Proof: Passport, lease agreement, trade license, telephone and electricity bills, ration card and GST certificate (if applicable)
  • Age Proof: Passport, Aadhaar Card, Voter’s identity card, Photo PAN card

 

Financial Documents required for MSME Loan:

MSME Loan Scheme 2020


MSME Loan Scheme 2020 is a way to provide effective financial assistance to start-ups and small business. It is also being offered under government schemes such as Mudra Loan, CGTMSE, PMEGP etc. Filecrat helps you get funds for your requirement easily.

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