Loans for MSMEs - Coronavirus Relief

Amidst the ongoing financial crisis facing industries due to the pandemic, the Hon’ble Finance Minister addressed the media regarding the comprehensive economic package introduced under the Aatma Nirbhar Bharat Abhiyaan. Industries, particularly MSMEs, were eagerly awaiting financial assistance from the Finance Ministry. Several schemes providing loans for MSMEs have been revealed in this package.

Emergency Working Capital Facility of Rs. 3 Lakh Crores to MSME Units

A term loan with concessional interest rates amounting to 20% of the outstanding credit of units as of 29th February 2020 will be extended to MSMEs, without requiring any guarantee or collateral.
Eligible units must have outstanding credit up to Rs. 25 crores and turnover up to Rs. 100 crores, provided their account status is standard.

Moreover, businesses can explore additional financial assistance options, such as the Mudra Loan to support their operations during challenging times.

Subordinate Debt for NPAs or Stressed MSMEs

Provision of Rs. 20,000 crores on account of subordinate debt for stressed or NPA MSMEs, with an additional Rs. 4,000 crores provided to the Credit Guarantee Trust for Micro and Small Enterprises.
Banks will offer subordinate debt to the promoters of MSMEs equaling 15% of their present stake, subject to a cap of Rs. 75 lakhs.
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MSME Funds of Funds for Equity Corpus

The government will introduce a Rs. 10,000 crores corpus into a Funds of Funds to provide equity funding to MSMEs, operating with a leverage ratio of 1:4.
MSMEs may also seek guidance on new setups, such as forming a One Person Company.

Revised Definition of MSME

The investment limit to classify enterprises as MSMEs will be raised to include more businesses, with turnover criteria also incorporated into the definition.

Additionally, businesses might find resources like ISO 9001 Certification useful to enhance their process standards.

Additional Measures for MSMEs

Government receivables and CSPs due to MSMEs will be settled within 45 days to aid their liquidity.

Furthermore, for those expanding their operations, obtaining a Trade License might be a necessary step.

Global Tender Relief for Government Tenders

General Financial Rules will be modified to waive global tender requirements for government procurements up to Rs. 200 crores.

EPF Support Under PMGKP Scheme

Government will continue its contribution to PF at 12% of salary for both employees and employers for eligible units for June, July, and August 2020.

Those needing assistance in managing financial accounts can learn more about regularizing a Dormant Account.

Reduction in EPF Contribution Rates

For the months of June to August 2020, PF contribution liability is reduced to 10% from the current 12% for both employers and employees.

Special Liquidity and Credit Guarantee Schemes for NBFCS, HFCs, and MFIs

The government will launch a Special Liquidity Scheme amounting to Rs. 30,000 crores, with support from the central bank. Investments will be backed by a government guarantee.
A Partial Credit Guarantee Scheme will also extend to Rs. 45,000 crores for lower-rated NBFCs, HFCs, and MFIs, providing a 20% first loss sovereign guarantee to the Public Sector Banks.

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Liquidity Injection and Rebates for DISCOMs

Power Finance Corporation and Rural Electrification Corporation will infuse up to Rs. 90,000 crores to DISCOMs for liquidity, enabling repayment of dues to power firms.
Central Public Sector Generation Companies will offer rebates to DISCOMs on condition that they pass relief to end consumers.

Extension for Contractors' Obligations

Central agencies, including entities like the Railways and CPWD, are instructed to extend the deadline for contractual obligations by six months.

Real Estate Developers' Relief

Registration and completion deadlines for real estate projects are extended by six months, with states authorized to provide an additional three-month extension.

Tax Relief and Measures

Businesses, including charitable trusts and non-corporate entities, will receive due income tax refunds promptly.
The rate of TDS and TCS, excluding salary payments, is reduced by 25% prospectively for the Assessment Year 2020-21, with tax return deadlines extended to November 30, 2020.

It's also crucial for businesses to stay informed about Pradhan Mantri Ujjwala Yojana for potential benefits and support.

Full Presentation

For a detailed overview of all the benefits and financial measures available to MSMEs, please see the Atmanirbhar Bharat – MSME Benefits presentation.

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Frequently Asked Questions

Common questions about Loans for MSMEs.

The Emergency Working Capital Facility provides a term loan carrying concessional rates of interest amounting to 20% of the outstanding credit of MSME units as on 29th February 2020. This loan will be extended without the need for any guarantee or collateral. Units with outstanding credit up to Rs. 25 crores and turnover up to Rs. 100 crores with standard account status will be eligible.

The government announced a provision of Rs. 20,000 crores as subordinate debt for MSMEs that are either Non-Performing Assets (NPAs) or stressed. Banks will provide subordinate debt to the promoters of these MSMEs, amounting to 15% of their present stake in the unit, subject to an upper cap of Rs. 75 lakhs.

The government will introduce a corpus of Rs. 10,000 crores into a Fund of Funds to provide equity funding to MSMEs. This fund will operate with a leverage ratio of 1:4, effectively infusing an equity corpus of Rs. 50,000 crores into the MSME sector.

The investment limit that defines enterprises as MSMEs has been raised to bring more units under the MSME category. Additionally, a turnover criteria has been added to the existing definition of MSMEs.

The residual measures include releasing MSME receivables and Contract and Seller Performance (CSPs) dues from the government within 45 days, waiving off global tender requirements for government tenders up to Rs. 200 crores, and continuing the EPF support scheme for eligible businesses.

A Special Liquidity Scheme of Rs. 30,000 crores backed by government guarantee has been announced for NBFCs, HFCs, and MFIs. Additionally, a Partial Credit Guarantee Scheme of Rs. 45,000 crores has been introduced, where the government will extend a 20% first loss sovereign guarantee to Public Sector Banks.

Power Finance Corporation and Rural Electrification Corporate will provide financial assistance of up to Rs. 90,000 crores to DISCOMs in two installments to enable them to repay their outstanding dues to power generation and transmission companies. Central Public Sector Generation Companies will also provide rebates to DISCOMs on the condition that they pass on the relief to final consumers.

All central agencies like Railways, CPWD, etc. have been directed to provide an extended time limit of 6 months to contractors for completing their contractual obligations.

The time limit for registration of real estate projects and completion of registered real estate projects has been extended by 6 months. States have been given the autonomy to further extend this time limit by an additional 3 months.

Income tax refunds due to charitable trusts and other non-corporate businesses will be issued at the earliest. Rates of TDS and TCS have been reduced by 25% prospectively, and the due date for filing income tax returns and tax audit has been extended. The deadline for making payments under the "Vivad se Vishwas" scheme has also been extended to 31st December 2020.