Different Schemes that Govt has Launched to Support Indian MSMEs

The Small and Medium scale enterprise sector is one of the fastest growing segments of the Indian manufacturing industry. Currently, it contributes to almost 40% of the nation’s GDP and employs almost 109 million people across the country.

However, despite its enormous growth prospect, SMEs and MSMEs operate with only a small fraction of the nation’s present manufacturing assets. Their total fixed assets amount to only Rs. 14,000 Crore, and only 16% of the total borrowed amount in the manufacturing and service sector.

Indian small and medium scale enterprises always suffered from a consistent lack of financing. It prevents them from procuring necessary components, like raw materials, or pay for utility, workforce, etc.

To mitigate this issue, the Government of India has initiated several financing options for businesses across the nation. These Government business loans provide the necessary finances to organisations at affordable rate of interest and flexible repayment terms.

There are several Government backed schemes as well as other MSME loan options that offer credits to small and medium scale enterprises in India. Let’s take a look at some of them.

• Stand-Up India Scheme – 

Stand-Up India is a scheme introduced by the Government of India in 2016. It is specially designed to meet the financial requirement of SMEs initiated by SC and ST category and women entrepreneurs.

An enterprise involved in manufacturing, trading, or service business (including greenfield enterprises) can apply for this loan scheme. The disbursed amount is pre-determined from a predetermined slab and contains financial aid for both working capital and term loan.

Companies run by a partnership can also apply under Stand-Up India scheme; however, in this case, 51% of the organisation’s share should be held by an SC, ST, or woman entrepreneur.

This policy offers a total of Rs. 10 Lakh to Rs. 1 Crore as credit for 7 years. The interest rate depends on the base rate. A tenor premium and 3% additional fee is charged on that.

• Pradhan Mantri Mudra Yojana (PMMY) – 

Another popular Government-backed financial assistance program is Pradhan Mantri Mudra Yojana. It is aimed towards service, manufacturing, retail, and agriculture sector to help them follow the growth plan for small businesses and generate employment. Mudra Loan is unsecured finance as the applicant doesn't have to pledge any collateral to avail the money. There are three categories in this type of credit; it is divided into Shishu, Kishor, and Tarun, and a borrower receives a certain amount of financial assistance depending on the category they fall into.

Mudra Loan has been extended by different financial institutions, including public and private sector lenders, cooperatives, and NBFCs. Its repayment tenor and rate of interest varies between different lenders. However, the Government of India allows up to Rs. 10 Lakh as credit under this particular scheme.

• SIDBI Make in India Loan for Enterprises (SMILE) – 

SMILE was introduced to help foster invention in technology, protect intellectual property, enhance skill development, and financially help MSMEs to create their necessary infrastructure. This scheme offers credits as soft loan and term loan to organisations in almost 25 different sectors. It is one of the primary Government business loans under the Make in India campaign aimed to boost creativity amongst citizens and help SMEs tap into business areas that will boom in 2018. SMILE prioritises on new enterprises in the service and manufacturing sector as well as smaller organisations within the MSMEs.

An organisation can get a loan of Rs. 25 Lakh to Rs. 50 Lakh under SMILE. Its rate of interest varies from 9.45% to 12.70%, and repayment tenor is up to 10 years, including a three years moratorium period.

One can also avail short term credits as a business loan from financial organisations like Bajaj Finserv. They offer credits at the attractive interest rate and flexible repayment terms, which helps borrow pay off the debt without straining their finances.

These are some of the business finance schemes offered by the Government of India aimed towards the improvement of SMEs and MSMEs across the nation. These have been one of the most significant contributors towards the growth of small scale industries across the country.

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