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FM Sitharaman announces Rs 3 lakh crore collateral-free automatic loans for MSMEs

Finance Minister Nirmala Sitharaman announced Rs 3 lakh crores collateral-free automatic loans for businesses, including MSMEs which will benefit 45 lakh units

Chitranjan Kumar | May 13, 2020 | Updated 17:11 IST
FM Sitharaman announces Rs 3 lakh crore collateral-free automatic loans for MSMEs
Finance Minister Nirmala Sitharaman

A day after Prime Minister Narendra Modi unveiled the special economic package of Rs 20 lakh crore, Finance Minister Nirmala Sitharaman on Wednesday announced a slew of economic measures to support stressed Micro, Small and Medium Enterprises (MSMEs). She announced Rs 3 lakh crores collateral-free automatic loans for businesses, including MSMEs, which will benefit 45 lakh units.

Also Read: Nirmala Sitharaman Speech Live Updates: FM unveils Rs 3 lakh crore collateral-free loans for MSMEs

"These loans will have a 4-year tenure, 12-month moratorium to be given. These will be 100 per cent credit guaranteed and available till 31st October, 2020," said Finance Minister.

In a bid to provide stressed MSMEs with equity support, the government will facilitate provision of Rs 20,000 crore as subordinate debt, which will benefit 2 lakh MSMEs, she said, adding that functioning MSMEs, which are NPA or are stressed will be eligible for this scheme.

She also proposed Rs 50,000 crore equity infusion for MSMEs through 'Fund of Funds', which will be operated via a Mother Fund and few daughter funds. This will help to expand their capacity and to get listed on markets which they choose, FM said.

She also announced revision of the definition of MSMEs to help them grow in size and get benefits.

"The definition of MSMEs is being changed for their advantage so that they can grow in size and get benefits. Investment limit which defined MSMEs have been revised upwards. Additional criteria being brought in is turnover size - earlier differentiation between manufacturing and service MSMEs will be categorised similarly," said Sitharaman.

Speaking at a press conference, FM outlined 14 different measures. The first 6 were for MSMEs, two for EPFO, two for NBFCs and Mutual Funds and one each for discoms, contractors, real estate and tax measures.

Prime Minister Narendra Modi on Tuesday announced a massive stimulus package of Rs 20 lakh crore to mitigate the impact of coronavirus and weeks of lockdown on the Indian economy. The Atmanirbhar Bharat Abhiyan economic package of Rs 20 lakh crore, equals to 10 per cent of the GDP and is aimed at solving the problems of several bleeding sectors as well as migrant labourers.

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