Since joining the Government as the first female Finance Minister of India in May 2019, Nirmala Sitharaman has introduced several MSME schemes to boost small businesses in India. We picked some of the top MSME schemes she introduced since taking office.
India is set to become a $3 trillion economy by this year, and MSMEs are expected to contribute to a large chunk of it. The MSME sector contributes to one-third of India’s GDP. The sector also provides employment for over 50 million Indians.
In the 2019 Union budget, Nirmala Sitharaman and her government heavily focused on initiating MSME schemes that will benefit the sector.
Increased lending and ease of credit access to small businesses
Currently, the overall finance demand by the MSME sector is around INR 87.7 Crores. This means small businesses require more capital to run daily operations.
Over the years, MSMEs struggled to get loans as they didn’t meet the eligibility criteria.
In September, Sitharaman encouraged banks to increase public lending at a time when consumer demand slumped sharply. Today, banks are working with non-banking financial companies or NBFCs to increase public lending.
Under this scheme, Nirmala Sitharaman emphasised that banks need not declare stressed MSMEs as Non-Performing Assets till March 31, 2020. Some banks also recast existing MSME debts.
- 1 Clearing dues owed to the MSME sector:
- 2 Doubling the cap on MSME loans:
- 3 Removing transaction charges on online payments:
- 4 Promoting ‘Make in India’ for traditional businesses:
Clearing dues owed to the MSME sector:
In order to support MSMEs financially and give them their credit back, Finance minister Nirmala Sitharaman has prompted banks who have sufficient liquidity to make efforts and ensure that large firms clear their dues to the MSME sector.
The ministry aims to talk to large companies that owe MSMEs over INR 40,000 Crores.
Bank officials are supposed to submit details to the finance ministry of:
- MSMEs taking credit from banks
- Non-performing MSME accounts
- GST registered MSMEs
According to an article by ET, the Government will also look at bankers for suggestions on allowing NBFCs with assets but poor institutional rating to become eligible under the Centre’s one-time partial credit guarantee scheme.
Doubling the cap on MSME loans:
An RBI committee led by Nirmala Sitharaman also moved towards doubling the cap on collateral-free MSME loans. The committee suggested hiking the ceiling for loans from INR 10 Lakh to INR 20 Lakh.
This comes in light of the government seeking to change the definition of MSMEs in the country. The loan hike will be extended to MSMEs that avail the Mudra loan scheme too.
Removing transaction charges on online payments:
In August 2019, Finance Minister Nirmala Seetharaman stated that any business with an annual turnover of INR 50 crore will not be required to pay transaction charges on any digital modes of transactions, excluding credit cards. This typically means 0% MDR on debit card charges.
No-fee debit card transactions are a blessing for small businesses that still use cash for daily payments.
Promoting ‘Make in India’ for traditional businesses:
Make in India has seen gradual growth since its inception in 2014. However, in the Union Budget 2019, the government proclaimed its revival, with an increased focus on the MSME sector. It happens to be one of the biggest projects in this financial year.
Scheme of Fund for Upgradation and Regeneration of Traditional Industries
With this, new clusters will be set up in the next year, to enable over 50,000 artisans to join the economic value chain. The prime sectors are Bamboo, Honey, and Khadi clusters.
Scheme for Promotion of Innovation, Rural Industry, and Entrepreneurship
This scheme looks to create 80 Livelihood Business Incubators and 20 Technology Business Incubators (TBIs) within the next year to develop 75,000 skilled entrepreneurs in agro-rural industry sectors.
If you have a business, then collecting payments online just got easier. While the Government’s MSME schemes are yet to see their long-term impact, Instamojo already facilitates easy and quick online payments for small businesses.