Background of the scheme
The Micro, Small and Medium Enterprises (MSME) sector is a significant contributor towards building up of a strong and stable national economy. Hon’ble Prime Minister while launching outreach initiative for MSME sector on the November 2018 highlighted that access to credit, access to market, technology up gradation, ease of doing business and a sense of security for. Employees are five key aspects for facilitating the MSME sector. 12 announcements have been made to address each of these five categories. As part of access to credit, he announced a 2 % interest subvention for all GST registered MSMEs, on fresh or incremental loans. Ministry of MSME has decided that a new scheme viz. “Interest Subvention Scheme for Incremental credit to MSMEs 2018” will be implemented over 2018-19 and 2019-20 with an allocation of Rs.975 crore.
Objective of the scheme
The Scheme aims at encouraging both manufacturing and service enterprises to increase productivity and provides incentives to MSMEs for on boarding in GST platform which helps in formalization of economy, while reducing the cost of credit. The Scheme will be in operation for a period of two financial years FY2019 and FY2020.
Monitoring of the scheme
The scheme would be monitored by a Governing Board [GB], chaired by Additional Secretary &Development Commissioner, Ministry of MSME. The GB shall consist of representatives of the Department of financial services (Ministry of Finance), SIDBI and public sector banks and MSME associations as members. The GB will lay down the policy guidelines and give necessary directions for smooth functioning of the Scheme. Continuation of the Scheme beyond FY2020 would be considered after an independent third-party evaluation by an institute of repute and performance of Key Performance Indicators [KPls] as advised by Ministry of MSME.
SIDBI will operate the scheme according to guidelines laid down and directions given. SIDBI would prescribe the modalities for submission of subsidy claims by eligible institutions. Further detailed methodology for release and adjustment of subsidy shall be worked out by GOI in consultation with SIDBI. SIDBI would specify in all communications that ‘Interest subvention amount shall be released by SIDBI subject to availability of funds from GOI.
Quantum of benefits available under Interest Subvention scheme 2018
As part of access to credit, our Prime Minister announced a 2 % interest subvention for all GST registered MSMEs, on fresh or incremental loans. The interest relief will be calculated at two percentage points per annum, on the incremental, amount of working capital credit or incremental/new term loan disbursed by eligible institutions to eligible MSMEs from the date of disbursal / drawal or the date of notification of this scheme whichever is later computed on outstanding balance from time to time and received/recovered by the lending institution. The interest rates charged to MSMEs shall conform to Code of Ethics and Fair Practices Code as published by respective institutions (as per extant RBI guidelines) and linked to the respective rating of the MSME as per internal/external rating as per applicable interest rate guidelines of the institution. The loan accounts on the date of filing claim should not have been declared as NPA as per extant guidelines in force. No interest subvention shall be admissible for any period during which the account remains NPA.
Eligibility criteria
1) All the MSMEs who have the following shall be eligible as beneficiaries under the Scheme:-
a. Valid Udyog Aadhar Number (UAN)
b. Valid GSTN Number
2) Incremental term loan or fresh term loan or incremental working capital extended duringthe current FYviz. from 2nd November 2018and next FYwould be eligible for coverage.
3) The term loan or working capital extended by Scheduled Commercial Banks and RBIRegistered Systemically Important Non-Banking Finance Companies (NBFCs).
4) In order to ensure maximum coverage and outreach, all eligible working capital or term loan would be eligible for coverage to the extent of Rs. 100 lakh only during the period of the Scheme.
5) Wherever for a single MSME both the facilities are extended viz. incremental working capital and term loan by an eligible institution, interest subvention would be made available only for a maximum financial assistance of Rs. 100 lakh.
6) MSME exporters availing interest subvention for pre-shipment or post-shipment creditunder Department of Commerce will not be eligible for assistance under Interest Subvention Scheme for Incremental credit to MSMEs 2018.
7) MSMEs already availing interest subvention under any of the Schemes of the State /Central Govt. will not be eligible under the proposed Scheme.