Budget 2021 Expectations: MSMEs seek extension of credit guarantee scheme, interest subvention coverage

Union Budget 2021 Expectations for MSMEs: The government had waived the onboarding fee of Rs 10,000 on TReDS platforms in September last year till March 2021 and had also integrated the new portal for registration of MSMEs — Udyam Registration with TReDS and government e-commerce platform GeM for seamless transactions.

MSME Budget 2021 Expectations, Budget 2021 Expectations for MSME
The government had revised the MSME definition last year as part of the steps taken to help businesses recover from the Covid impact. (Photo source: IE)

Union Budget 2021-22 Expectations for MSMEs: With the post-pandemic budget just around the corner gaining significance to understand the measures to be rolled out towards accelerating full recovery of key sectors such as MSME, businesses are expecting further relief to their working capital crisis. MSMEs, which were allocated Rs 3.7 lakh crore of the Atmanirbhar package last year by the government, are seeking an extra boost to the credit side of their requirements to get back in the pre-Covid shape as soon as possible.

“The budget should extend the credit guarantee scheme available for MSMEs at least for the next 12 months. That will help them to get access to credit from NBFCs without much difficulty. There should be a stipulated target for the scheme geography-wise, sector-wise, and rating wise,” Umesh Mohanan, Executive Director & CEO, Indel Money told Financial Express Online. The government had already extended the Emergency Credit Line Guarantee Scheme (ECLGS) twice from the scheduled timeline till October 2020 to November and further till March 31, 2021, with the launch of ECLGS 2.0 tweaking the criteria around eligibility, turnover limit, moratorium, and repayment window to pique interest among potential borrowers. The government had also expanded the scope of the scheme to extend coverage beyond MSMEs and Mudra loan borrowers to individual loans for business purposes.

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Interest subvention scheme, which offers interest relief to MSMEs of 2 per cent per annum on their outstanding fresh or incremental term loan and working capital loans, is another critical area where small businesses would be happy to see an extension. The scheme was extended till March 31, 2021, however, its coverage is limited to the loans to the extent of Rs 1 crore. “We would like to propose that the scheme to extended further with enhanced coverage. We request the government to consider a 3 – 4 per cent interest subvention to the extent of Rs 300 lakh (Rs 3 crore). Since a key agenda of interest subvention scheme for MSME is to get them on-board the GST horizon, the relaxation will attract more MSMEs on board,” said Vikash Agarwal, President, Indian Chamber of Commerce.

To help MSMEs with their working capital requirement, the government has been urging small businesses with zero onboarding fee to register on the TReDS platforms including Invoicemart, m1xchange, and RXIL. However, TReDS platforms seek “amendments to Factoring Act to be passed and NBFCs other than NBFC factors to be allowed as financiers on TReDS. This would open up TReDS for a vast number of MSMEs,” said Ketan Gaikwad, CEO and MD, RXIL.  The government had waived the onboarding fee of Rs 10,000 on TReDS platforms in September last year till March 2021 and had also integrated the new portal for registration of MSMEs — Udyam Registration with TReDS and government e-commerce platform GeM for seamless transactions.

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