What is MSME? Explaining Schemes, Eligibility & Benefits

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What is MSME?

The meaning of MSME is micro, small and medium enterprises. These micro and small-scale industries form the pillar of our economy. However, this type of MSME business requires support and shield from other large-sized organisations as they lack technology resources. The government offers these enterprises some MSME schemes, rebates, and MSME yojanas.

MSME Scheme 2020

The Indian Government has developed many schemes to offer credit facilities to the MSMEs, including MSME Scheme 2020 and MSME Scheme 2021. Here are the schemes, their eligibility and benefits that assist MSME businesses.

  1. Pradhan Mantri Mudra Yojana

This PMMY scheme provides funds up to 10 lakhs to small or micro-enterprises. These funds are categorised as MUDRA (Micro Units Development and Refinance Agency Limited) loans underneath PMMY.

MUDRA backs the development of MSME enterprises. Under PMMY, there are three schemes called ‘Shishu’, ‘Kishore’ and ‘Tarun’, which indicate the growth stage and the funding requirements of an MSME company.

Eligibility: Age: 18 – 65; MSMEs with no earlier defaults with banks

Benefits of PMMY: ‘Shishu’ provides loans up to Rs.50,000. ‘Kishor’ offers funds of more than Rs.50,000 up to Rs.5 lakhs. ‘Tarun’ offers above Rs.5 lakhs up to Rs. 10 lakhs.

  1. Prime Minister’s Employment Generation Programme

This PMEGP scheme promotes self-employment opportunities through micro-enterprise enablement in the non-farm sector. It is implemented by the Khadi and Village Industries Commission (KVIC) at the state level.

KVIC routes government-based subsidies by assigning banks for disbursal to the entrepreneurs straight into their bank accounts.

Eligibility: Any person/s who is/are 18+ years of age is/are eligible. They must be at least VIII standard pass for the MSME projects, in the manufacturing industry costing Rs.10+ lakh and in the service industry costing Rs. 5+ lakh.

Benefits of PMEGP: The utmost cost of the MSME project in the manufacturing industry is Rs.25 lakhs, and in the services industry is Rs.10 lakhs.

  1. Credit Guarantee Trust Fund for Micro & Small Enterprises

This CGTMSE scheme is enabled to establish a credit assurance scheme for MSMEs. The Indian Government and Small Industries Development Bank of India (SIDBI) pay the amount of this scheme.

Eligibility: Both current and new MSME enterprises are entitled to the scheme. The entitled candidates can approach banks and choose Regional Rural Banks, eligible for offering help as per this scheme.

Benefits of CGTMSE: The assured cover obtainable is in the range of 50%/75%/ 80% or 85% of the allotted amount of the credit facility. It is applicable for micro-enterprises up to 5 lakhs, and the limit of assurance cover is 85%.

  1. Credit Linked Capital Subsidy Scheme

This CLCSS scheme enables a subsidy for technology up-gradation for MSME restructuring. This scheme offers a 15% subsidy for an added investment of up to Rs. 1 crore.

Eligibility: Any MSME company is eligible for this scheme. But the companies replacing present technology with the same technology will not be suitable. Likewise, the companies upgrading with used technology equipment would not be entitled.

Benefits of CLCSS: The objective is to enable technology up-gradation by offering a 15% capital subsidy to MSMEs directly on institutional finance.

This scheme offers an open subsidy of 15% on institutional credit of Rs.1 crore for acknowledged sectors, subsectors or technologies permitted under the scheme.

  1. Equity Infusion through Fund of Funds

MSMEs face a lack of equity. Venture Capital (VC) or Private Equity (PE) companies provide early-stage investment. However, they offer limited growth-stage funding. The Fund of Funds scheme provides equity funding to MSME players who can grow and get listed on stock exchanges.

Eligibility: All MSME players are entitled.

Benefits of Funds: The planned fund of funds will reassure private sector investments in the MSME, leveraging Rs.50,000 crore.

  1. Credit Guarantee Scheme for Subordinate Debt

This CGSSD scheme backs promoters of the operational MSMEs, which have turned NPA as of 30th April 2020. The promoters will further infuse this fund into the MSME unit as equity, boost the liquidity, and sustain the explicit debt-equity ratio.

Eligibility: The operational MSMEs who are NPA would be entitled.

Benefits of CGSSD: The scheme offers 90% assurance to the sub-debt, and the rest, 10%, will be from the promoters.

  1. SIDBI Make In India Scheme

This particular SIDBI Make In India Loan For Enterprises (SMILE) scheme promotes the Indian Government’s ‘Make in India’ campaign, and assists MSMEs take part in this growing campaign. This scheme offers a soft loan as per quasi-equity. It even offers term loans on comparatively soft conditions to MSMEs meeting the debt-equity ratio.

Eligibility: Both existing and new players are enclosed under this scheme. The present MSME enterprises get opportunities for undertaking transformation, technology upgrades and other projects for maturing their business.

Benefits of SMILE: The smallest loan size is Rs.10 lakh for technology equipment. The smallest loan size for other projects is Rs.25 lakh. The settlement period is up to 10 years, comprising a moratorium of 36 months.

  1. MSME Business Loan for Startups

The Indian Government announced the MSME Business Loan for Startups enabled in merely 59 Minutes. The loan approval procedure is done through an online portal, and it is entirely automated.

Eligibility: Any MSME who needs a business loan is eligible. The enterprise needs to be IT compliant and should have six months bank statements.

Benefits: The business loan is offered between Rs. 1 lakh to Rs. 5 crores on approvals. The mudra loan approvals are offered from Rs.10,000 to Rs.10 lakh. The loans are provided with or without company collateral.

  1. MSME Loan Scheme by Banks

Banks and other financial institutions enable MSMEs by providing term loans and working capital loans. The term loans are offered for capital expansion and working capital loans for day-to-day cash needs.

Limit for Enterprises to have Micro, Small or Medium Eligibility

The present MSME arrangement is based on the principles of investment in the plant, equipment and machinery. So, to have the MSME gains, they have to bind their investment to a lower limit, as stated below:

Current MSME Classification

Industry Criteria Micro Small Medium
Services Funds and Investment < Rs.10 lakh < Rs.2 crore < Rs.5 crore
Manufacturing Funds and Investment < Rs.25 lakh < Rs.5 crore < Rs.10 crore

Moving Forward

This blog showcased examples of micro, small, and medium enterprises and MSME updates. MSME backs 45 per cent of India’s internal industrial employment, and subsequently, it is the spine of our country’s financial economy.

Today, India’s MSME sector has emerged as a highly progressive domain, and many prominent organisations are doing significant work to advance MSMEs with new and affordable technology.

Airtel and NSIC collaborated to take the Digital Transformation of Indian MSMEs a step ahead. Airtel has partnered with Cisco and Google Cloud to introduce ‘Airtel Office Internet’- a Broadband internet for businesses to quicken the digital transformation of startup businesses.

Furthermore, Airtel assists startups with Mobile corporate postpaid connections and Internet leased line solutions and enables dedicated high-performance Internet for startups to run their operations smoothly.