Government Measures to ensure Distribution of ₹3L crore loan to MSMEs 

emergency credit line loan to MSMEs
(Last Updated On: June 4, 2021)

Prime Minister Narendra Modi announced a committee today to help with the implementation and distribution of the ₹3L crore loan to MSMEs.

The decision came a week after the Government announced a consolidated  ₹20 Lakh crore scheme to help businesses bounce back after the lockdown. Of this, the Government will disburse over 3L crore automatic loan to MSMEs as collateral-free loans.

Quick measures the Government has taken to implement the loan scheme:

The committee appointed by the PM will address any issue that arises with the implementation of the 3L crore loan to MSMEs.

MSME Minister Nitin Gadkari has requested small businesses to email him directly in case any issues arise from the credit line.

As per Government guidelines, lenders will continue standard underwriting norms and ensure monitoring over businesses that borrow under the scheme.

What we think:

The Government should encourage digital MSME underwriting to enable easier borrowing and fewer judgements based completely on qualitative ratings. It will remove increased back and forth for small businesses, physical use of paper, manual interventions and reduce room for error.

Also read: Top Government schemes for the MSME sector to bounce back after COVID 

Features of the 3L crore automatic loan to MSMEs 

  • The automatic loan for MSMEs is not classified as non-performing assets (NPAs).
  • The loan tenor will be of four years with a 12-month moratorium on payment on principal and interest.
  • These loans will be available without any guarantee fees or fresh collateral.
  • The Government is providing a 100% credit guarantee on both principal and interest for loans taken till 31 October.
  • Also, the Government has agreed to bear all losses in case of defaults on these loans; as it provides 100% credit guarantee to banks and NBFCs for such loans.

Also read: Small business-friendly Loans that will help your business stay afloat

Who is eligible for the3L crore emergency credit line:

MSMEs that carry outstanding loans up to 25 crores, and with a turnover of 100 crores;  (subject to the cap of 20 per cent of outstanding credit).

How to get back to business: Instamojo afterthoughts

According to an article by The Print, loans under the scheme could go bad. Here’s how you can ensure it is put to good use:

  1. Save on taxes: The Government’s revenue department is working to reduce indirect taxes on startups to boost the entrepreneurial sector. Read about the different tax saving schemes that can help your business save money.
  2. Generate invoices: Keep a track of all your payments and orders with vendors and upload them duly on the GSTIN portal. This helps you claim your Input Tax Credit on time without any delay.
  3. Save on office space: Factories and warehouses should be opened only on selected days. Therefore, resume production on a smaller scale, and encourage office staff to work from home.
  4. Reduce procurement cost on items: Also, make sure you save money on raw materials.
  5. Take care of your credit history: Banks are continuing to monitor businesses that are applying for credit schemes. Make sure you start small to gain a better credit score. This helps your business gain access to loans.
  6. Go digital: Take your business online. when you save money on office space, invest it into an online platform, to ensure a wider audience and a larger demographic for customers to find you.

You can start with our Instamojo online store. Switching to Instamojo offers you lower transaction fees, free setup and zero maintenance. The Government is pushing for e-commerce industries to rise, and this is the perfect time to set up your online store with us. Remove cash from your registry and switch to online payments. Empty your shelves and add them to our new and advanced online store.


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