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Nirmala Sitharaman announces collateral-free loans for MSMEs worth Rs 3 lakh crore

FM Nirmala Sitharaman announcement for MSMEs: Finance Minister Nirmala Sitharaman said these collateral-free automatic loans to MSMEs come with four-year tenor and no repayment for 12 months.

By: Express Web Desk | New Delhi |
Updated: May 13, 2020 5:56:39 pm
Nirmala Sitharaman to unveil economic package at 4 pm today Finance Minister Nirmala Sitharaman. (File Photo)

In a bid to provide support to the struggling micro, small and medium enterprises (MSME) sector, Finance Minister Nirmala Sitharaman on Wednesday announced collateral-free automatic loan worth Rs 3 lakh crore.

Addressing a press conference, a day after Prime Minister Narendra Modi’s announcement of a Rs 20 lakh crore economic package, Sitharaman said that these collateral-free loans come with four-year tenor and no repayment (moratorium) for a period of 12 months. The minister said this will help 45 lakh MSME units across the country in resuming business activity and safeguarding jobs.

This apart, the finance minister said that a Rs 20,000 crore subordinate debt will be provided for the stressed MSMEs. This she said would benefit around two lakh such businesses.

Read | From MSMEs to EPF to NBFCs: Here’s everything Nirmala Sitharaman announced

Sitharaman said that various businesses and MSMEs have badly been hit due to COVID-19 and they need additional funding to meet the operational liabilities built up, buy raw materials and restart businesses.

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The minister also said that a fund of funds for the MSME sector is created, which will be infusing Rs 50,000 crore equity in those MSMEs having growth potentials.

Separately, Sitharaman said that the definition of MSMEs has been revised by the government to allow those units having investment up to Rs 1 crore to be termed as micro units in place of Rs 25 lakh now. Along with this, the minister added that the units having a turnover of up to Rs 5 crore will be called micro units.

She said that a turnover-based criteria is being introduced to define the small businesses, and added that there has been a long-pending demand for revisions.

FM Nirmala Sitharaman announcement for MSMEs: Covid-19 Economic relief package for MSME Sector. Read Details Here (Source: Aatmanirbhar Bharat Part-1: Businesses including MSMEs)

The investment and turnover limits for small and medium businesses too have been raised to allow them to retain fiscal and other benefits, Sitharaman said.

The minister also said that global tenders will be banned for government procurement up to Rs 200 crore. This, she said would help the MSMEs to compete and supply in government tenders.

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