Interest Subvention Scheme for MSMEs

The Ministry of Micro, Small and Medium Enterprises (MSME), Government of India, on November 2, 2018, has announced "Interest Subvention Scheme for MSMEs". Small Industries Development Bank of India (SIDBI) is the single national level nodal implementation agency for the scheme.

Purpose

The Scheme aims at encouraging both manufacturing and service enterprises to increase productivity and provides incentives to MSMEs for onboarding on 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 FY 2019 and FY 2020.

Eligibility for Coverage

1. MSMEs who meet the following criteria shall be eligible as beneficiaries under the Scheme:
• Valid Udyog Aadhar Number [UAN]
• Valid GSTN Number
2. Incremental term loan or fresh term loan or incremental or fresh working capital extended during the current FY viz. from 2nd November 2018 and next FY would be eligible for coverage.
3. The term loan or working capital should have been extended by Scheduled Commercial Banks.
4. In order to ensure maximum coverage and outreach, all working capital or term loan would be eligible for coverage to the extent of Rs100 lakh only during the period of the Scheme.
5. Wherever both the facilities working capital and term loan are extended to a MSME by an eligible institution, interest subvention would be made available for a maximum financial assistance of Rs 100 lakh.
6. MSME exporters availing interest subvention for pre-shipment or post-shipment credit under 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.

Interest subvention

The interest relief will be calculated at two percentage points per annum (2% p.a.), on outstanding balance from time to time from the date of disbursal / drawal or the date of notification of this scheme, whichever is later, on the incremental or fresh amount of working capital sanctioned or incremental or new term loan disbursed by eligible institutions.

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 internal / external rating of the MSME 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.

Source : RBI