Ease of doing business for MSMEs: Finance minister Nirmala Sitharaman had announced a number of measures particularly related to credit access for MSMEs in the last year’s budget to aid post-Covid recovery for businesses along with more employment generation through digital channels. Below are the key announcements made by Sitharaman last year and how they have progressed during the year:
The government’s Emergency Credit Line Guarantee Scheme (ECLGS) was extended up to March 2023 from March 2022. Its guarantee cover was also expanded by Rs 50,000 crore to a total cover of Rs 5 lakh crore in the budget, with the additional amount being earmarked exclusively for hospitality and related enterprises.
Update: As per the latest update, (till November 30, 2022), the scheme had sanctioned 1.19 crore loans (borrowers) involving 71 per cent or Rs 3.58 lakh crore of the total scheme limit of Rs 5 lakh crore while 57 per cent or Rs 2.85 lakh crore loans were disbursed. Out of the total sanctioned amount, 66 per cent was extended to MSME borrowers while 95.17 per cent of loans sanctioned also belonged to MSMEs. The data was shared by the Minister of State in the finance ministry Bhagwat Karad in the Lok Sabha in December 2022.
Also read: Budget 2023: Experts suggest strengthening existing schemes to boost MSME credit access
Finance minister Nirmala Sitharaman had also announced the revamping of the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme with the “required infusion of funds”. The minister had said that the move will facilitate additional credit of Rs 2 lakh crore for micro and small enterprises (MSEs) and expand employment opportunities.
Update: SIDBI, the implementing body for the credit guarantee scheme under CGTSME, had announced a slew of measures to revamp the scheme. First, micro and small enterprises (MSEs) seeking guarantee cover under the scheme for the collateral-free credit will have to provide their Udyam registration number (URN) from next year onwards; second, microfinance institutions (MFIs) were added to the list of member lending institutions (MLIs) such as public and private banks, regional rural banks, foreign banks, small finance banks, urban co-operative banks, and other MLIs in lending to new enterprises with credit guarantee cover.
Third, the annual guarantee fee (AGF) was reduced for MLIs by 10 per cent in order to encourage them to enhance credit flow to MSEs. The AGF for loans up to Rs 10 lakh was reduced from 0.75 per cent across all activity including trading to 0.68 per cent. Likewise, for Rs 10 lakh to Rs 50 lakh loans, the AGF has been dropped from 1.10 per cent standard rate to 0.99 per cent while for loans ranging from Rs 50 lakh to Rs 2 crore, the AGF stands at 1.08 per cent from earlier 1.20 per cent. Fourth, the scheme was extended to women and SC-ST entrepreneurs, MSEs certified with the Zero Defect and Zero Effect (ZED) scheme, and MSEs based in aspirational districts in the country as well.
Also read: Economic Survey: MSMEs’ Covid recovery evident in GST paid crossing pre-pandemic level
The five-year rollout of the Rs 6,000-crore World Bank-assisted Raising and Accelerating MSME Performance (RAMP) programme was announced by Sitharaman to help the MSME sector become more resilient, competitive and efficient.
Update: After the budget announcement, the scheme was formally launched by Prime Minister Narendra Modi in June 2022. In July, the Minister of State for MSMEs Bhanu Pratap Singh Verma informed the Parliament that a committee for the scheme headed by the ministry’s Secretary BB Swain was set up with representation from allied ministries and departments. Earlier this month, the web portal for the scheme was launched by MSME minister Narayan Rane. The credit support is likely to begin in the second year of the scheme.
“6.35 lakh MSMEs are likely to benefit from better access to market, finance and credit under the scheme,” the finance ministry had tweeted recently. Sharing the scheme’s update, the ministry said 25 states and one union territory have been onboarded to be part of the scheme.
Interlinking of Udyam, e-Shram, NCS, ASEEM
In order to make access to government data on registration of MSMEs, unorganised workers, availability of skilled workforce, etc., more seamless, Sitharaman had announced in the last year’s budget that four portals viz., Udyam, e-Shram (creating national database of unorganised workers), National Career Service (NCS – catering to employment-related services like job search, job matching, career counselling, etc), and Atmanirbhar Skilled Employee-Employer Mapping (ASEEM – matching supply of skilled workforce with the market demand) will be interlinked.
The minister said this will widen their scope and will have live, organic databases, providing G2C, B2C and B2B services. “These services will relate to credit facilitation, skilling, and recruitment with an aim to further formalise the economy and enhance entrepreneurial opportunities for all,” Sitharaman said in her speech.
Update: The NCS portal has been integrated with the Udyam portal and ASEEM portal. So far, more than 10 lakh candidates from e-Shram have registered on NCS out of which, more than 1.2 lakh candidates have been shortlisted by employers for jobs. More than 46 lakh skilled candidates of the Skill India portal (primary data source of ASEEM portal) have been registered on NCS through data exchange, according to the data shared by the Economic Survey 2022-23.
Moreover, integration between Udyam and NCS has facilitated more than 4,76,650 MSME employers in getting seamless registration on the NCS portal. Also, the e-Shram portal has been integrated with NCS and ASEEM. As on 31 December 2022, a total of over 28.5 crore unorganised workers have been registered on the e-Shram portal. Female registrations stood at 52.8 per cent of the total and 61.7 per cent of total registrations belonged to the age group 18-40 years.
Surety Bonds in Public Procurements
To reduce indirect cost for suppliers and work contractors, Sitharaman had said the use of surety bonds as a substitute for bank guarantees will be made acceptable in government procurements. “IRDAI has given the framework for the issue of surety bonds by insurance companies,” the minister said. This was expected to support MSME suppliers and work contractors who could now look at insurance firms for surety of their payments.
Update: No official update from the government. MSME association FISME in a letter in November last year had urged Sitharaman for the same. “The FM in her last budget said bank guarantees will be replaced by surety bonds. It was supposed to be issued by insurance companies. But they never issued it. Bank guarantee sucks up the working capital of MSMEs. SBI General insurance is the only one to say it is going to launch soon. No one else have replied to our queries,” Anil Bhardwaj, Secretary General, FISME, had said.
The 2nd edition of FE Aspire’s SMExports Summit is here. Register now to book your seats!