Interest subvention for MSMEs: Modi govt extends scheme validity to March 2021

Ease of Doing Business for MSMEs: The government had announced the scheme on November 2, 2018, to offer interest relief on loans to the extent of Rs 1 during FY19 and FY20.

Ease of Doing Business for MSMEs: In order to further provide interest relief of 2 per cent per annum to MSMEs, Modi government has extended the validity of the Interest Subvention Scheme for MSMEs till March 31, 2021, the Reserve Bank of India (RBI) said in a notification on Wednesday. “The validity of the scheme has been extended till March 31, 2021. Accordingly, fresh or incremental term loan/working capital limit extended by co-operative banks with effect from March 3, 2020, will be eligible for coverage under the scheme,” the notification read. The government had announced the scheme on November 2, 2018, to offer interest relief on loans to the extent of Rs 1 crore and implemented for FY19 and FY20 and now up to FY21.

The announcement comes nearly 10 months after the government had approved amendments in the scheme in December 2019. The notification included modifications such as acceptance of claims in multiple lots for a given half-year by eligible institutions permitted, the requirement of Udyog Aadhar Number dispensed with for MSMEs eligible for GST instead of UAN GSTN numbers earlier mandatory; MSMEs, which are not required to obtain GST, allowed to either submit Income Tax Permanent Account Number or their loan account must be categorised as MSME by the concerned bank; and trading activities without UAN allowed to be covered. The notification was addressed to heads of all urban co-operative banks, state co-operative banks, and district central co-operative banks.

The changes, however, were already part of the amendments approved in December that also included “50 per cent of the estimated claim amounts may be released to eligible institutions (at least to those belonging to Public Sector Banks), based on data/information to be furnished by them and the Utilisation Certificate duly certified by respective statutory auditor to submitted by June 2020,” as per an MSME Ministry statement on December 16, 2019. According to an update by the MSME Ministry, out of the total corpus of Rs 975 crore, Rs 825 crore (including SIDBI administrative fee) was released to SIDBI for claim settlements as on September 30, 2020. SIDBI had received and settled the claims of Rs 825 crores from 57 banks/NBFCs. SIDBI is the nodal implementation agency for the interest subvention scheme for MSMEs.