The new definition of MSME and Provisions for it

MSME and its provisions

Let’s understand the definition of MSME and the provisions for it with the scenario when PM Narendra Modi announced a special economic package of INR 20 lakh crore to help India fight against Covid-19. The package will help India self-reliant, small businesses grow,  under the scheme – Aatmanirbhar Bharat Abhiyan to emerge as a superpower in 21st Century.

India’s self-reliance will be based on five pillars–
✅ Economy

✅ Infrastructure

✅ Technology-driven system

✅ Vibrant demography, and

✅ Demand.

The fourth phase of lockdown will be based on inputs from the states of the nation.

This special economic package is for the laborers, farmers, honest taxpayers, MSMEs, and the cottage industry. Finance Minister Nirmala Sitharaman has announced the details of the package.

In her announcement, she revised the definition of MSME to include more small businesses under MSME and to help small businesses grow

Collateral free loan for MSME

What changed :


• No distinction between Manufacturing and services business.

• Turnover criteria also added in the definition

• Investment limit revised upward

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What is offered to MSMEs?

Automatic loan (credit line) to businesses including MSMEs from Banks and NBFCs up to 20% of entire outstanding credit as of February 29, 2020

Who is eligible?

• This loan is applicable to both working capital and term loans.

• This loan is available even if you have your installment overdue. ⠀⠀
Further details are yet to be announced by the Finance Ministry.

Who is not eligible?

• Businesses who do not have a loan outstanding with any bank or NBFC as of February 29, 2020


• This loan is not for businesses who have borrowings more than INR 25 Crores

•This loan is not for businesses whose turnover is more than INR 100 Crores

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinate debt provision

Worried about how to run your business as your loan is marked as NPA??? Here’s what GOI has offered you in Aatmanirbhar Bharat Economic Package.

What is subordinated debt financing?


Subordinated debt is an unsecured loan or bond that ranks below other, more senior loans (higher priority loans) concerning claims on assets or earnings.

Why issue Subordinated debt to MSME?


Because subordinated debts are only repayable after other debts have been paid, they are riskier for the money’s lender. The debts may be secured or unsecured. Subordinated loans typically have a lower credit rating and, therefore, a higher yield than senior debt.

Is subordinated debt the same as equity?


Subordinated debt interest is a tax-deductible expense. Also, the cash received does not increase the firm’s equity, meaning it is not income and hence incurs no tax liability that must be reported on the income statement.

𝗪𝗵at is offered?

Stressed MSME does have a problem of equity. GOI will facilitate the provision of INR 20,000 Crores as subordinate debt. This may help 200,000 MSMEs.

Who is eligible?

Functioning MSME who is NPA (Non-Performing Asset) or are stressed will be eligible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Rooting for you!

Sonia

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