Interest subvention scheme for msmes

  The Micro, Small, and Medium Enterprises [MSME] sector contribute significantly to developing a robust and stable national economy. Access to credit, accessibility to market, technological upgradation, the convenience of doing business, and a sense of safety for workers are five crucial components for enabling the MSME sector, according to the Hon’ble Prime Minister, who launched an outreach campaign for the MSME industry on November 2nd, 2018. To tackle each of these five categories, twelve statements have been issued. The prime minister announced a 2% interest rate reduction for all GST-registered MSMEs who take out new or incremental loans to improve access to finance.

Interest Subvention Scheme with a Purpose

The following are the goals of the interest subsidy scheme:

• To boost productivity in service as well as manufacturing businesses.
• To provide incentives to MSMEs for implementing GST to promote economic growth and lower the cost of borrowing.

Interest Subvention Scheme Eligibility

The scheme is open to all MSMEs that meet the following criteria:

• MSMEs with a valid GSTN and a valid Udyog Aadhaar Number (UAN). MSMEs that are not qualified for GST do not need a GSTN and can register for this program by providing their Permanent Account Number (PAN) or having their loan account classified as MSME by the concerned bank.
• Even if you don’t have a UAN, the plan protects your trading operations.
• MSME exporters who get interest subsidies from the Department of Commerce for post-shipment and pre-shipment credit are not eligible for support under the plan.
• MSMEs currently receiving interest subsidies from the state or the federal government will be ineligible for the programme.

Formalities

1. On the iterative or fresh amount of working capital authorized or incremental or new long-term debt distributed by eligible institutions, equity relief will be determined by calculating at two percentage points per annum (2 % p.a.) on outstanding balances from time to period from the date of disbursal / drawal or the deadline of notice of this scheme, whichever one is later, on the outstanding balances from moment to days from the date of disbursal / drawal or the schedule of confirmation of this scheme, whichever is
2. Interest rates paid to MSMEs must comply with the institution’s Code of Ethics and Fair Practices (as per current RBI recommendations) and be connected to the MSME’s internal/external rating as per the bank’s applicable interest rate regulations.
3. The loan balances should not be labelled as non-performing assets (NPA) at the time the claim was filed, according to current criteria. When the account remains NPA, no interest subvention is allowed.

Submission of a Claim

1. Eligible lending institutions’ nodal offices should submit their half-yearly claims to SIDBI in the format provided in Annex I. Information on loans granted and tax relief requested (branch-by-branch) must be presented in a soft copy in an excel document, as specified in Annex II.
2. Annex III contains the data collection format for branches of qualified institutions. The branches can submit the information to their Controlling Offices / Head Offices.
3. The qualified institutions’ statutory auditors must officially confirm all claims. The certificate must include a statement on individual account verification, including the amount, incremental/new lending, the interest charged, and claimed amount. Lending institutions must guarantee that the total amount of relief claimed in Annex I, II, and III is matched.
4. Half-year claims should be sent to SIDBI’s Chief General Manager, Institutional Finance Vertical in Mumbai.
5. After MoMSME has released funds, each claim will be paid out to an individual institution.

Other agreements

1. SIDBI will operate as a Nodal Agency, channelling interest subsidies to various lending institutions by their Nodal office.
2. All financial institutions would be accountable for accurate data input and scheme monitoring.
3. The interest subsidy would only be released if the eligible institutions’ Statutory Auditors duly approved the claim. SIDBI will not be held accountable for any incorrect data submitted by lending institutions.
4. SIDBI will release the interest subvention amount of funds from the Government of India that are available. In addition, for all debt subvention-related matters, the MoMSME GOI shall be the ultimate authority, and their judgement will be final as well as binding.

Benefits Offered The Interest Subvention Scheme is a programme that helps people save money on their interest payments.

Interest relief is offered on existing loans/balances of MSMEs under this scheme at a rate of 2% per annum from the time of disbursement of the loan or the announcement date of this program, whichever one is later. MSMEs receive a 2% interest subsidy on new/incremental working capital approved or new/incremental term loans granted by qualifying banks.

The Interest Subvention Scheme’s Applicability

An MSME can claim up to 100 lakh rupees in interest subvention for the amount of its cash flow or long-term debt sanctioned by an approved institution. The tax subvention on the remaining balance of MSMEs’ loans is the incentive under this scheme.

MSMEs may also be eligible for an interest subsidy on the remaining balance of incremental or new working capital authorized or transferred to them by and over one scheduled bank.

The government has extended this program to include cooperative banks, which has become qualified finance companies underneath the scheme since the onset of COVID-19. As a result, the plan covered fresh or additional term loans and working capital provided by cooperative and planned financial firms from March 3rd, 2020, to March 31st, 2021.

Putting the Agency of Interest Subvention Scheme into Action

The Small Industries Development Bank of India (SIDBI) implemented the interest subvention scheme. All financial institutions must submit accurate information and keep track of the interest subsidy programme. The nodal office of qualifying institutions shall send to the SIDBI their partially requests in the format prescribed by the interest subsidy programme guidelines for claims processing of the scheme.

MSMEs can apply directly to authorized lending institutions for overdue capital investments or term loans for interest subvention. The interest subsidy would be released the eligible lending institutions’ claims were duly validated by their Statutory Auditors.

The SIDBI will provide the interest subsidy amount if funds are available from the government. For all interest subvention matters, the Ministry of MSME is the final authority, and their judgement is binding and final. Accepting funds by authorized lending institutions is recognized as a certificate of fund utilization.

On November 2nd, 2018, the Ministry of Micro, Small and Medium Enterprises (MSME) announced the MSMEs Interest Subvention Scheme for scheduled commercial banks. The Department of MSME initially planned to execute this initiative across the 2018-19 and 2019-20 fiscal years. Due to the COVID-19 epidemic, the government decided to prolong the programme for another year, to FY 2020-21. As a result, the system was in effect until March 31st, 2021.