Government may extend tenure of MSME loan scheme

With small businesses still facing the heat of Covid-19, the government may extend the tenure of Rs 3 lakh crore collateral-free loan scheme, announced in May, till the end of this year.

The Centre is also considering widening the turnover limit for MSMEs by Rs 50 crore or more from the current Rs 100 crore, to help a larger section of companies avail various sops announced by the government.

In May, Finance Minister Nirmala Sitharaman had announced Rs 3 lakh crore collateral-free automatic loans for businesses, including MSMEs. The collateral-free loan was expected to help about 45 lakh businesses.

Borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover were eligible to avail the loans, which had a four-year tenor and a moratorium of 12 months on principal repayment.

The loans came with a 100% credit guarantee cover for banks and NBFCs, which extended the loans to businesses, on principal and interest.

But it was criticised by experts for covering a tiny section of nearly 6.4 crore MSMEs of India.

“MSMEs are a crucial part of the economy and play a vital role in the supply chain. It is important to extend them financial support as long as they do not stand on their own feet. The government is working out stimulus based on suggestions from various quarters,” the official said.

Several stakeholders have also demanded a one-time restructuring of loans of small businesses. It will help companies align their cash flow.