Interest relief for MSMEs to be calculated at 2 pc under subvention scheme: MSME Ministry


The Ministry of MSME recently issued operational guidelines for implementing an interest subvention scheme for MSMEs, adding that interest relief will be calculated at  two percent points per annum, reported KNN.

The interest subvention scheme aims to encourage manufacturing and service enterprises to increase productivity. It provides incentives to MSMEs to get onboard the GST platform. On a large scale, this in accordance with the formalisation of the economy while reducing the cost of credit.

This two percent interest relief will be calculated on the incremental amount of working capital credit or incremental/new term loan. The report added that it will apply on loans disbursed to MSMEs from the date of disbursal/draw or date of notification of this scheme, whichever is later. It will be computed on the outstanding balance from time to time and received/recovered by the lending institution.

Further, the new scheme named ‘Interest Subvention Scheme for Incremental credit to MSMEs 2018’ will be implemented from 2018 to 2020 and has been allocated Rs 975 crore. The ministry added that in order to ensure maximum coverage and outreach, all eligible working capital or term loan would be eligible for coverage to the extent of Rs 100 lakh during the period of the scheme.

Further, in cases where an MSME has availed both incremental working capital and term loan, interest subvention will be made available for a maximum financial assistance of Rs 100 lakh.

However, MSME exporters availing interest subvention for pre-shipment or post-shipment credit under the Department of Commerce will not be eligible for assistance under this scheme. In addition, MSMEs already availing interest subvention under any other schemes of the state/central government will not be eligible under this.

The ministry also said that the loan accounts on the date of filing the claim should not have been declared as NPA.  No interest subvention shall be admissible for any period during which the account remains NPA, it added.

The benefit of the scheme will be available to those MSMEs who have a valid Udyog Aadhar number, a valid GSTN Number, and the term loan or working capital extended by Scheduled Commercial Banks and RBI-registered systemically important Non-Banking Finance Companies.

The move comes a few months after Prime Minister Narendra Modi announced a two percent interest subvention for all GST registered MSMEs on fresh or incremental loans. The government had also decided to increase interest subvention on pre- and post-shipment credit from three to five percent.


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