PM Narendra Modi launches quick loan access scheme for MSMEs for loans up to Rs 1 crore

Ringing in an early Diwali for micro, small and medium enterprises (MSMEs), Prime Minister Narendra Modi, on November 2nd delivered, "12 historic" gifts to the sector.

These included availing loans in less than an hour, subsidised cost of capital, enhanced mandatory procurement of goods from MSMEs and 20 hubs and 100 spoke technology training centres.

"Decisions taken during Diwali have positive long-lasting effects... Today, I will gift 12 historic gifts to the MSME sector," Modi said.

Dividing the "needs of the sector" in five categories, Modi announced 12 policy decisions addressing each.

"There are five factors that are required to run a good MSME. First, easy access to capital at lower interest rates. Second, better access to the market. Third, improved technical assistance. Fourth is to enhance ease of doing the business and lastly, job security to the sector," he said.

Capital and cash flow

Announcing the revolutionary step of availing loans in less than an hour, Modi said that businesses with small balance sheets and lower turnover have difficulty in accessing loan.

"This affects your cash flow which further affects your business," he said.

To ease the capital requirements, Centre has launched a web portal which can be used to receive in-principal approval of loans within 59 minutes.

Each public sector bank has been enrolled on the portal which will assess the entrepreneur's bank statement, income tax return and GST return to sanction the loan.

The term loans or loans for working capital requirements up to Rs one crore will now be approved either on the designated portal or GST portal.

Furthermore, banks will lend loans at "subsidised rates" if applied through GST web portal.

"The loans under this portal will be sanctioned at a cost which will be less than the normal rate by 2 percent," Modi said.

He added that exporters would also be eligible for a subsidised interest rate for pre/post shipment requirements. "The loans would cost 5 percent less than the usual rate," he said.  This is an additional discount of 2 percent.

To ease the capital requirements, Modi "urged" big corporates to clear the bills of MSMEs on time even as he made Trade Receivables e-Discounting System (TReDS) mandatory.

"For all companies with turnover more than Rs 500 crore, registration on TReDS will be compulsory," he said.

The Prime Minister said that MSMEs could upload their supply bills, as proofs, on the web portal to receive loans from banks.

He further said that if MSMEs continue to face issues with respect to delayed payments from big corporations, they could register their complaints at the 'Samadhaan' portal of the MSME ministry's website.

Women and market
Addressing concerns of small enterprises who find it tough to reach the wider market, Centre has made it mandatory for state-run units to purchase more goods from the sector.

"Till now, public sector units (PSUs) were buying 20 percent of their total goods from the sector... From today, it will be mandatory for the government sector to buy 25 percent of their total supply from MSMEs," Modi said.

He further said that three percent of this 25 percent will be reserved for women entrepreneurs. That is, PSUs will now have to buy three percent of their stock from women entrepreneurs.

Recognising the power of online shopping space, Modi said that it was time that MSMEs enjoy its fruit.

"It's time of e-commerce and online transactions... Therefore, it will now be mandatory for all central public sector enterprises (CPSEs) to register on GeM, " he said.

GeM or Government e-Market is a web portal launched by the government in 2016. It provides an electronic market space where buyers and sellers can interact and sell goods.

According to government data, there are more than 1.5 lakh suppliers and over 29,000 buyer organisations registered on the portal. The website facilities business worth Rs 14,000 crore.

"By registering on the GeM, MSMEs will get easy access to various e-commerce aggregators," Modi said.

Technical support

Modi went on to give technical support to MSMEs as his seventh gift on Diwali.

He announced a Rs 6,000 crore package for development of tool-rooms on a cluster-based model.

"Centre will develop 20 technology centres as hubs and 100 centres as spoke to provide training in latest technology," he said.

Centre presently has only 10 tool rooms in the country where MSME are given lessons in "technical up gradation by providing good quality tooling."

Ease of Doing Business

Standing tall, especially with the pharmaceutical sector, Modi announced a special package for development of the sector.

Centre will develop "pharma clusters" in the country and will bear 70 percent of the set-up cost.

Modi government further eased operating in India by diluting paper-work and promoting minimal documentation.

Modi announced that MSMEs would have to file returns under eight labour laws and 10 union regulations only once a year.

"This would be done once a year against a current practice of twice," he said.

He further said that inspection at various MSME centres would be done by a person, alloted randomly via an online process.

"Online selection would improve transparency in the system," Modi said adding that the person in-charge will have to upload the report on the website within 48 hours.

Moreover, to make the business environment more conducive, Modi pitched for self-attestation of environmental clearances.

He said that one form for air and water pollution will now be required by MSMEs which will be self-attested.

"For environmental inspections, only 10 percent of the Enterprises will be randomly inspected by the government," he said.

Lastly, he said the government has amended Companies Act 2013 to decriminalise unintentional and minor errors.

"For (rectification of) these mistakes, you will only have to follow simple procedures and not approach courts," he said.

Social Security

Addressing the last category of teething trouble to the sector, Modi said that employees working under the MSME sector will compulsorily have to enrol themselves under social security schemes.

These would be all central government schemes related to insurance, pension, provident fund etc.

Modi launched the 100-day MSME outreach programme midst much fan-fare and cheer from the sector.

"We are significantly pushing for initiatives for MSMEs. MSME is the second largest employer after agriculture sector and India is an economic powerhouse due to the MSMEs. We must take collective initiative & responsibility for the MSME sector," he said.

The programme will cover 100 districts across the country which will be personally monitored by Modi. Various central ministers will visit these districts to "apprise the entrepreneurs about various facilities being extended by the government and financial institutions" to the sector.