Credit and Finance for MSMEs: To improve credit access for MSMEs, the government is all set to lay out a Merchant Credit Card (MCC) Scheme for traders and a Vyapar Credit Card (VCC) for microunits, reported the Economic Times.
The VCC is expected to offer an interest-free credit period of up to 50 days and around 85 per cent coverage under the Credit Guarantee Fund for Micro Units. Along the lines of Kisan Credit Card, MCC Scheme may also provide loans to merchants at a subsidised interest rate, the report added.
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“The MCC scheme will provide flexibility to the banks to align their product with their board-approved policies,” stated the report citing a government official. The apex body for MSME licensing and regulation, Small Industries Development Bank of India (SIDBI) is working out the details for the VCC that will incentivise MSMEs to get registered on the Udyam Portal, the official added.
In addition to that, the objective of launching the credit cards is to encourage nano-MSMEs such as roadside vendors and kirana owners and bring them under the formal financial system, said another official. “There should be uniformity in card benefits for each group of MSMEs as the existing MSME cards vary in their terms,” he added.
The idea of coming up with a credit card for MSME entrepreneurs similar to the Kisan Credit Card was pitched by a parliamentary standing committee on finance headed by Jayant Sinha, Member of Parliament and former Minister of State for Finance, reported ET in April.
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The centre is also planning to offer short term credit at low interest rate to MSMEs to meet their working capital requirement and ensure continuity of credit flow in the MSME ecosystem amidst a global economic slowdown. According to the MSME Ministry data, India has 63 million MSMEs that provide employment to 110 million people.
Meanwhile, the parliamentary standing committee in April had said that the credit card to MSME entrepreneurs is required to create a mechanism for payment scores and would turn out as a significant ramp up of SIDBI to provide regular credit to small businesses, ET noted in its previous report.