The Ministry of Micro, Small and Medium Enterprises (MSMEs), Government of India had announced ‘Interest Subvention Scheme for MSMEs 2018’ on 2nd November 2018 for Scheduled Commercial Banks. Since the outbreak of COVID-19, the Government of India extended this scheme to cover Co-operative Banks who became eligible lending institutions from 3rd March 2020. The MSME decided to implement this scheme over the years of 2018-19 and 2019-20.
Now, the validity of this scheme is extended till 31st March 2021 by a circular issued by RBI on Wednesday. The fresh or incremental term loan or working capital limit given by co-operative banks with effect from 3rd March 2020 will be eligible for coverage under this scheme.
The circular by RBI also permits acceptance of claims in multiple lots for half-year by eligible institutions. It dispenses the requirement of Udyog Aadhaar Number (UAN) for units eligible under GST. For those units which do not require to obtain GST may either submit Income Tax PAN or there must be a categorisation of their loan account as MSME by the concerned banks. This scheme now covers trading activities without UAN.
This scheme aims to encourage both manufacturers and service enterprises to increase productivity and provide incentives for onboarding MSMEs on GST platform. The onboarding of MSMEs on GST platform will help in formalisation of the economy while reducing the cost of credit.
MSME sector is a significant contributor in our country for building a strong and stable national economy. The key aspects for facilitating the MSME sector are access to credit, access to market, ease of doing business, technology upgradation and a sense of security for employees. The Prime Minister announced 2% interest subvention for all GST registered MSMEs, for fresh or incremental loans as part of access to credit.
This scheme covers all term loans or working capital to the extent of 100 lakhs. But, the loan accounts declared as NPA on the date of filing the claim cannot file a claim under this scheme. No interest subvention will be admissible for any period during which the account remains NPA.
The national-level nodal implementation agency for this Scheme is the Small Industries Development Bank of India (SIDBI). The nodal office of eligible institutions should submit to the SIDBI their half-yearly claims in the format as provided in the guidelines for claim submission of the scheme.
The circular by RBI also urges the co-operative banks to take appropriate action and issue necessary instructions to their branches or controlling offices for successful implementation of this Scheme. The extension of this scheme provides relief to the pandemic hit MSMEs.
For any clarifications/feedback on the topic, please contact the writer at firstname.lastname@example.org
I am an Advocate by profession. I interpret laws and put them in simple words. I love to explore and try new things in life.