Govt Scheme For Entrepreneurs
An increasing number of startups and new businesses have been founded in India over the last decade, the majority of them by men. While many Indian women have entrepreneurial ambitions, it is often more difficult for them to succeed. The cause of low female entrepreneurship rates, one of the main reason is difficult access to finance and networks. This brief examines the one means of finance available by the Government of India which can push entrepreneurial empowernment.
In a developing country like India, MSME industries are the backbone of the economy.
What is MSME:
It is known as MICRO (in Hindi it is ‘Suksham’), Small (In Hindi it is termed as “Laghu”) & Medium (In Hindi it is termed as “Madhyam”) Enterprises.
A separate Ministry is there which is looking after the matter related to MSMEs. Further, an Act namely Micro Small & Medium Enterprises Act, 2006 is also there to the benefit of MSMEs.
Sector Covered Under MSMEs:
Only Manufacturers and Service Providers are eligible to take registration. Traders/Wholesalers are not covered.
Criteria for Registration under MSMEs:
If we talk about the before announcement scenario the Criteria for eligibility was seen purely on the basis of Investment made in the Plant & Machinery (in case of manufacturing enterprise) or investment in Equipment (In case of Service Providing Enterprise), and there are separate investment limits for Manufacturing sector and Service Sector, now after the amendment as announced, there are two broad changes in the definition of MSMEs.
- The Separate Investment Limits are done away with. I.e. now onwards single parameters will be applicable for both the sectors.
- In addition to the Limits of Investment, Turnover Limits are to be seen in order to test the eligibility.
Both the Situations are summarized in the Table Below to have the clear understanding. The Entities who are now applying for the MSME registration has to provide their investment in Plant & Machinery as well as turnover. However it is pertinent to note here that there is no detailed guidelines laid by the government that on which date the Investment or for which year the turnover will be considered for the registration. Such detailed guidelines are awaited from the Government side.
|Status of Business||Earlier (Before 13.05.2020)||Amended (Same for Mfg& Service Sector)|
|MICRO||Mfg. Sector: Investment in P&M up to Rs. 25 Lac Service Sector: Investment in Equipment up to Rs. 10 Lac||Investment: up to Rs. 1 Crore Turnover: up to Rs. 5 Crore|
|SMALL||Mfg. Sector: Investment in P&M is more than 25 Lac but up to 5 Crore Service Sector: Investment in Equipment more than 10 Lac up to Rs. 2 Crore||Investment: up to Rs. 10 Crore Turnover: up to Rs. 50 Crore|
|MEDIUM||Mfg. Sector: Investment in P&M is more than 5 Crore but up to 10 Crore Service Sector: Investment in Equipment more than Rs. 2 Crore but up to Rs.5 Crore||Investment: up to Rs. 20 Crore Turnover: up to Rs. 100 Crore|
BENEFITS OFFERED UNDER MSME?
1.Collateral Free loans from banks:
The Credit Guarantee Fund Scheme (CGS) for Micro and Small Enterprises was launched by the GOI to make available collateral-free credit to the micro and small en-terprise sector. Both the existing and the new enterprises are eligible to be covered under the scheme. The Ministry of Micro, Small and Medium Enterprises, Government of India and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises.
2.Protection against delayed payments
- A payment due to a micro or small enterprise cannot exceed forty-five days from the day of acceptance or the day of deemed acceptance
- In case of failure by the buyer to make payment on time, the buyer is required to pay compound interest with monthly interest rests to the supplier on that amount from the agreed date of payment or fifteen days of acceptance of goods or service. The penal interest chargeable for delayed payment to a MSME enterprise is three times of the bank rate notified by the Reserve Bank of India.
- Mandatory reporting in Tax Audit report along with non allowance of Interest paid under Income Tax.
3.Credit Linked Capital Subsidy Scheme:
Under this scheme, new technology is provided to the business owners to replace their old and obsolete tech-nology. A capital subsidy is given to the business to upgrade and have better means to do their business. The small, micro and medium enterprises can directly approach the banks for these subsidies.
This scheme helps innovators with the implementation of their new design, ideas or products. Under this from 75% to 80% of the project cost can be financed by the government. This scheme promotes new ideas, designs, products etc.
5. Bank Interest:
Rate of Interests are lower for the registered ones as compared to other enterprises. Public sector banks are permitted to categorize their MSME general banking branches as specialized MSME branches having 60% or more of their advances to MSME sector. This is to provide for a better service to this sector as a whole.
New Benefits under “Atmanirbhar Bharat Scheme”
i. 3 lakh Crores Collateral-free automatic loans for business, MSMEs
An emergency credit line has been allowed to business/MSMEs from banks and NBFCs up to 20% of their entire outstanding credit as on 29.2.2020.
Meaning thereby that this relief is for those MSMEs which were already working before lockdown and running loans from banks/NBFCs and running them in standard category and they are facing the cash crunch due to the lock down. For those MSMEs, to resume their operations i.e. to start procuring material, payment of wages/salaries, payments to vendors etc. this facility of emergency credit Line up to 20% of their entire outstanding credit as on 29th Feb 2020.
Borrowers having outstanding up to Rs. 25 Crores and turnover of Rs. 100 crores are eligible to take benefit.
The tenure of the loan would be 4 years with moratorium of 12 months on Principal repayment.
100% credit guarantee
There will be 100% credit guarantee cover to Banks and NBFCs on principal and interest.
This scheme can be availed till Oct 31, 2020
No fresh collateral
It has been clearly specified that there would not be any guarantee fee or fresh collateral requirement for availing benefit under the scheme.
ii. 20,000 crores subordinate debt for stressed MSMEs
– Stressed MSMEs need Equity Support
– Functioning MSMEs which are NPA or Stressed will be eligible
– GOI will support Rs. 4000 Cr. To CGTMSE
– CGTMSE will partially support the Banks
– Promoters of the MSMEs will be given Debt by Banks which will in turn infuse by the promoter in the Equity of the Unit
iii. 50,000 Crores equity infusion for MSMEs through funds of funds
In order to address the issue of severe shortage of equity in MSMEs during these tough time, The Govt. has proposed to set up Funds of Funds (FoF) with corpus of Rs. 10,000. The corpus would provide equity funds for MSMEs with growth potential and viability. This step would help to expand MSME size as well as capacity and will also encourage listing of MSMEs on main board of stock exchanges.
iv. Global Tenders up to Rs. 200 Crore:
Govt. expands scope for global tenders for MSMEs In order to protect the MSMEs from unfair competition from foreign companies, the Govt. has decided to take a major step towards Self-reliant India by disallowing Government procurement tenders up 200 Crores for foreign Companies, this step would give major boost to medium enterprises in India which faces tough competition at hands of foreign players.
Note: The above enumerated measures are discussed as per the Announcements made by FM, we are expecting a detailed guidelines in near future regarding the practical execution of these measures.
MSME is one way to get yourself registered and avail the benefits offered by the Government.there are many other way we can get finance from Bank and Private Institutions. We all have heard about MSME but what MSME means and what benefits are offered. So we hope with this we atleast are familiar with the nomenclature of the word MSME. Many Women Entrepreneurs in India have registered their business under MSME and availed the maximum benefits under this scheme. So, we strongly suggest to avail this opportunity by registering your business under the MSME Act if business meets the criteria of Investment in Plant & Machinery and Turnover.