MSME Loan Scheme
India’s Micro, Small, and Medium Enterprises (MSMEs) have long been the backbone of the country’s economic growth. These enterprises contribute significantly to the nation’s development by generating employment and fostering innovation. However, one of these businesses’ key challenges is access to credit. To address this issue, the Government of India has launched several loan schemes and initiatives to provide financial support to MSMEs. In this article, we will delve into some of the most prominent MSME loan schemes of 2024, with a special focus on their eligibility, nature of assistance, and the impact they have on the growth of these enterprises.
Pradhan Mantri Mudra Yojana (PMMY)
The Pradhan Mantri Mudra Yojana (PMMY) was introduced by the Hon’ble Prime Minister in 2015 to support non-corporate and non-farm small or micro-enterprises. Under PMMY, loans up to 10 lakhs are extended to micro-units, and they are classified as MUDRA loans under the Micro Units Development and Refinance Agency Limited (MUDRA).
The scheme offers three categories of loans:
- ‘Sham’ for loans up to Rs. 50,000.
- ‘Kichu’ for loans between Rs. 50,000 and Rs. 5 lakhs.
- ‘Danush’ for loans between Rs. 5 lakhs and Rs. 10 lakhs.
These categories cater to the diverse funding needs of micro-units at various stages of development, empowering them to establish and expand their businesses.
Prime Minister’s Employment Generation Programme (PMEGP)
The Prime Minister’s Employment Generation Programme (PMEGP) is a merger of two earlier schemes and aims to create self-employment opportunities for unemployed youth and traditional artisans in the non-farm sector. This program is executed by the Khadi and Village Industries Commission (KVIC), which serves as the nodal agency at the national level.
PMEGP extends financial support to individuals above 18 years of age who meet specific educational and project cost criteria. The scheme encourages new projects and provides subsidies based on the sector and location of the business.
Credit Guarantee Trust Fund for Micro & Small Enterprises (CGT MSE)
The Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE) was established by the Ministry of Micro, Small and Medium Enterprises and the Small Industries Development Bank of India (SIDBI). CGTMSE provides credit guarantees to MSMEs, enabling them to access loans without the need for third-party guarantees or collateral.
The guarantee coverage ranges from 85% for Micro Enterprises (up to Rs. 5 lakhs) to 50% for retail activity. Both new and existing enterprises are eligible, and the guarantee cover is available for credit facilities ranging from Rs. 10 lakhs to Rs. 200 lakhs.
Credit Linked Capital Subsidy Scheme (CLCSS)
The Credit Linked Capital Subsidy Scheme (CLCSS) focuses on technology upgradation for MSMEs. It offers a 15% subsidy on additional investments up to Rs. 1 crore for technology upgrades. This scheme promotes the adoption of state-of-the-art technology and encourages MSMEs to stay competitive in their respective sectors.
Equity Infusion for MSMEs through Fund of Funds
MSMEs often face a shortage of equity, hindering their growth prospects. The Fund of Funds initiative is designed to provide equity funding to MSMEs with growth potential. It encourages private sector investments in MSMEs and aims to address the financing needs of these enterprises.
Credit Guarantee Scheme for Subordinate Debt (CGSSD)
The Credit Guarantee Scheme for Subordinate Debt (CGSSD) aims to support operational MSMEs facing financial stress. Promoters of such MSMEs can avail credit equal to 15% of their stake, infusing this amount as equity into the business. This approach helps increase liquidity and maintain the debt-equity ratio, offering a lifeline to MSMEs on the verge of becoming Non-Performing Assets (NPAs).
SIDBI Make In India Loan For Enterprises (SMILE)
The SIDBI Make In India Loan For Enterprises (SMILE) aligns with the ‘Make in India’ campaign, providing soft loans to MSMEs for establishing or expanding their businesses. The scheme targets new and existing enterprises, emphasizing financing for smaller MSMEs. SMILE offers a minimum loan size and a repayment period of up to 10 years.
MSME Business Loan for Startups in 59 Minutes
The Government of India has introduced a streamlined online portal to provide MSME Business Loans in just 59 minutes. This initiative aims to automate and digitize the loan application process, making it efficient and hassle-free for eligible businesses. The loans are offered with or without collateral, starting from Rs. 1 lakh and going up to Rs. 5 crores.
MSME Loan Scheme by Banks
Banks and financial institutions play a crucial role in providing term loans and working capital loans to MSMEs. These loans support various financial needs, from daily cash requirements to capital expansion. Multiple banks and institutions offer diverse loan schemes with varying terms, interest rates, and eligibility criteria.
Access to credit is pivotal for the growth and development of MSMEs in India. The Government of India has introduced many loan schemes and initiatives to address this need and empower micro, small, and medium-sized enterprises. These schemes cater to a wide range of businesses, offering support at different stages of development, from startups to existing enterprises. By availing of these schemes, MSMEs can enhance their competitiveness, expand their operations, and contribute significantly to the nation’s economic prosperity.