REFORMED SCHEME OF MSME 

 Due to the unpredictable situation caused by Covid-19 in the nation, a lot of sectors, industries, business are getting affected. Considering the present situation, Finance Minister Nirmala Sitharaman on 1st August 2020, has announced that loans will be provided for larger MSMEs (Micro, Small and Medium Enterprises) and professionals for business purposes within the reach of ECLGS (Emergency Credit Line Guarantee Scheme). 

This announcement was given by the government as COVID-19 pandemic relief, under ECLGS now, 100% collateral of up to Rs. 3 lakh crore with a 100% guarantee will be provided to severely impacted MSMEs through banks, financial institutions and non-banking finance companies (NBFC) by National Credit Guarantee Trustee Company (NCGTC), this 100% guarantee is provided so that banks, NBFC can extend credit to businesses and MSMEs to meet their additional term loans or their additional working capital requirement during this pandemic. The total credit which was sanctioned as part of ECLGS, by both private and public sector banks, as of July 2020 was at Rs. 1,30,491.79 crore out if which Rs. 82,065.01 crore has already been issued by the financial institutions to the professionals who are in dire need of this loan scheme. Finance minister Sitharaman, at an event of industry chamber FICCI (Federation of Indian Chambers of Commerce and Industry) has said that “banks cannot refuse credit to MSME’s which are covered under emergency credit facility. If refused such instances must be reported”. 

Previously, the loans that were available for companies through ‘ECLGS’ was Rs. 100 crores but now after the announcement by the finance minister, the annual turnover ceiling on companies which could avail loans through this scheme has increased to Rs 250 crores. This is with accordance to the new definition of Micro, Small and Medium Enterprises. The definition of the revised definition of MSME has benefited the many sectors in numerous ways. Some of which are, bank loans have become cheaper as the rate of interest has been reduced, various tax rebates are given to MSME.