Micro, small, and medium enterprises (MSMEs) and small and medium enterprises (SMEs) play a pivotal role in the growth of the Indian economy. These companies generate employment, deliver innovative products and services, and contribute to the overall exports.
This sector approximately contributes 37% to the Gross Domestic Product (GDP). Additionally, it accounts for 40% of exports and 45% of the total industrial production. Like all sectors, MSMEs and SMEs were deeply impacted by the Coronavirus (COVID-19) pandemic.
However, the government’s policies and the easy availability of SME loans from various financial institutions are aiding their faster recovery. Here are six incentives offered by the Finance Minister in the COVID-19 relief package announced in May 2020:
- INR 3 lakh crore collateral-free loans to be made available through banks and non-banking financial companies (NBFCs), as several companies are unable to avail of finance due to the non-availability of acceptable collaterals and SME loan solutions
- Stressed or businesses classified as non-performing assets (NPAs) to receive equity support under INR 20,000 crore subordinate debt offered by the government
- Setting up of Fund of Funds of INR 50,000 crore will infuse equity in businesses with growth potential
- Companies with a paid-up capital base of less than INR 2 crore and turnover below INR 20 crore will be classified under small businesses
- For government schemes of up to INR 200 crore, global tenders will be disallowed
- Pending payments to this sector to be paid immediately
In addition to the measures announced under the COVID-19 relief package, Budget 2021 has proposed many other initiatives to boost this sector. Some of these include:
- Modification of the Factor Regulation Act, 2011, allowing invoice financing to SMEs and MSMEs, which will help businesses meet their short-term monetary requirements
- App-based invoice financial loan products for the sector
- Increased credit disbursement, lower premium, and more insurance coverage under the Niryat Rin Vikas Yojana to businesses that meet the SME loan eligibility criteria
- Subordinate debt to provide quasi-equity as financial support for SMEs and MSMEs
- Setting up an investment clearance cell, knowledge transition cluster setup for providing information to businesses about various processes, and revised turnover limits to avail of tax benefits
These measures aim to accelerate the availability of credit to companies at competitive SME loan interest rates and boost their growth. Financial institutions like Mahindra Finance offer customized solutions to meet the specific requirements of this sector. The entire process is fast and stress-free. The lender requires limited SME loan documents. You can visit the financial provider’s website to know more about such loans.