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Government Loan Schemes for Micro, Small and Medium Enterprises (MSMEs) in India

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The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS)1

Loan schemes offered by the Government of India

The CGS was launched by the Government of India (GoI) to provide collateral-free finance to the micro and small enterprise sector.

A trust named ‘Credit Guarantee Fund Trust for Micro and Small Enterprises’ (CGTMSE) was es-tablished by the Ministry of Micro, Small and Medium Enterprises, GoI and Small Industries Devel-opment Bank of India (SIDBI), to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises.

Small Industries Development Bank of India Loan for Small Enterprises (SMILE)

SIDBI began its small business funding schemes way back in 1990, and is now a popular financial institution that plays a vital role in the development and promotion of the Indian small business community. Some schemes offered by SIDBI include:

In association with SIDBI, Govt. of India has launched an innovative loan program for SMEs, the SIDBI Make in India Loan for Small Enterprises (SMILE). A budget of INR 10,000 crore has been allocated to SMILE.

Focused on the 25 sectors under PM Modi’s Make in India vision, SMILE will offer qua-si-equity and term based short term loans to Indian SMEs with less stringent rules and regulations.

Indirect Assistance Scheme

Direct Assistance Scheme

National Equity Fund, Scheme

Promotional and Development Activities

Scheme and Equipment Finance Scheme

Technology Development and Modernization Fund Scheme

MahilaUdyam Nidhi (MUN)

Single Window Scheme

Integrated Development of Leather Sector Scheme (IDLSS)

FPTUFS – Scheme for Food Processing Industries

Credit Link Capital Subsidy Scheme for Technology Upgradation (CLCSS)3

To aid small business owners in creating an impact in the international trade, the Ministry of Small Scale Industries (SSI) offers a scheme for technology upgradation of Small Scale Indus-tries, the Credit Linked Capital Subsidy Scheme (CLCSS).

The scheme is launched to facilitate technology upgradations by extending an upfront capital subsidy of 15% (up to a maximum of INR 15 lakhs) to SSI units for credit availed by them for the upgrading of their plant and equipment.

This scheme is available to machinery to sole proprietorship, partnership firms, cooperative, pri-vate and public limited companies. In year 2016 itself, about 3373 MSMEs benefitted from this scheme, availing subsidy amounting to about 215.29 crores

A Scheme for Promotion of Innovation, Rural Industry & Entrepreneurship(ASPIRE)4

This scheme is aimed at setting up a network of technology centres, incubation centres to accelerate entrepreneurship and to promote start-ups for innovation and entrepreneurship in rural and agriculture based industry with a fund of INR 210 crores.

The planned outcomes of ASPIRE are setting up Technology Business Incubators (TBI), Livelihood Business Incubators (LBI) and creation of a Fund of Funds for such initiatives with SIDBI.

1st LBI set up in April-2015 under ASPIRE within a month of launching the Scheme. The first batch of 107 youth has been trained and skilled through it. 19 LBIs have been approved till September 2015 and another 9 LBIs & 2 TBI is ready to be approved.

Mini Tools Room and Training Centre Scheme5

The Government of India, in order to provide assistance to the state governments set up Mini Tool Room and Training Centres, offers financial assistance in the form of one-time grant-in-aid.

The mission of this scheme is to develop more tool room facilities to provide technological sup-port to the MSMEs and training in tool manufacturing and tool design to create a skilled work-force of workers, supervisors, engineers/designers.

The financial support equals to 90% of the cost of machinery/equipment (up to a maximum of INR 9 crores) in case a new Mini Tool Room is to be created. In case an existing room is to be up-graded, 75% of the cost (up to a maximum of INR 7.50 crore) is funded.

Market Development Assistance Scheme for MSMEs6

The Market Development Assistance Scheme for MSMEs facilitates funding for participation in international trade fairs and exhibitions under MSME India kiosk. This aims at helping Indian manufacturing SMEs gain a grip in the international markets.

It also offers financing for sector-specific market studies by industry associations, and export promotion councils. This scheme offers reimbursement of 75% of a one-time registration fee and 75% of annual fees (recurring) paid to GSI by SMEs for the first three years for the bar code.

Mudra Loan Scheme7

Micro Units Development and Refinance Agency Ltd (MUDRA) is an organiza-tion established by the Government of India for development and refinancing activities relating to micro units. The vision of MUDRA IS – ‘Funding the Un-funded’.

Mudra Loan Yojana, is a 3-teir government loan structure targeted towards different businesses depending on the size and stage of the business. The three tiers of this Mudra Loans are:

Mudra bank loan initiative makes available low cost funding for MFI (Micro Finance Institutes). MUDRA would be responsible for refinancing all financiers or financial institutions engaged in financing of Small Businesses, Societies, Co-operative Societies, Small Banks, Scheduled Commercial Banks and Rural Banks that are in the business of lending to micro or small businesses en-gaged in manufacturing, trading and services industries.

MUDRA loans can be obtained through any Bank, MFI, or NBFC for availing of MUDRA loans under Pradhan Mantri Mudra Yojana (PMMY). The lending rates are as per the prevailing RBI guidelines issued in this regard.

Shishu Loan (Finance up to INR 50,000for start-ups).

Kishore Loan (Finance ranging between INR 50,000 and INR 500,000 for existing but new businesses).

Tarun Loan (Finance ranging between INR 500,000 and INR 10,00,000 for established businesses looking for expansion).

Scheme for 'Providing Financial Assistance on Bar-Code' (NMCP Scheme)8

Financial assistance is provided by 75% reimbursement of only one-time registration fee and 75% of annual recurring fee for first three years paid by MSEs to GS1 India for using Bar Coding.

All MSMEs with EM registration can take benefit of this scheme. Applications are accepted online or by contacting the nearest MSME-DI.

Performance and Credit Rating Scheme for Micro and Small Enterprises9

This scheme aimed at creating awareness amongst MSMEs about the strengths and weaknesses of their operations and their credit worthiness. The Scheme is implemented by National Small Industries Corporation (NSIC) and Rating under the scheme is carried out through empanelled rating agencies i.e. CRISIL, ONICRA, ICRA, SMERA, Brickwork, India Ratings (earlier known as FITCH) and CARE. The enterprises are free to select any rating agency empanelled with NSIC.Any registered Indian MSME can apply for this.

Ministry of MSME reimburses 75% of fee charged to the MSMEs. Units with a turnover of up to 50 lakhs are reimbursed 75% of fee up to a maximum of INR 15,000. MSMEs with turnover of INR 50 lakhs to 200 lakhs are reimbursed a maximum of INR 30, 001. Those above 200 lakhs are reimbursed 75% of fee up to a maximum of INR 40,000.

Scheme for 'Providing financial assistance on International Cooperation'10

The activities undertaken under this scheme are:

Thus, we can see that the current Indian government has a lot to offer to the MSMEs in India. Choose the appropriate Govern-ment business loan scheme as per your industry and funding needs of your small-scale business.

Disclaimer: All the above information is sourced from publicly available data on the website of the Ministry of Micro, Small and Medium Enterprises (msme.gov.in/), a department of the Government of India. The above list is not an exhaustive one, please visit the website of Ministry of Micro, Small and Medium Enterprises for comprehensive information on all schemes for MSMEs and related information.

Deputation of MSME business delegations to other countries for exploring new areas of technology infusion/upgradation, facilitating joint ventures, improving market of MSMEs products, foreign collaborations, etc.

Participation by Indian MSMEs in international exhibitions, trade fairs and buyer-seller meets in foreign countries as well as in India, in which there is international participation.

The scheme makes available credit facilities in the form of term loans and working capital financing of up to INR 100 lakh per borrowing unit.

The amount is contributed by the Government and SIDBI in the ratio of 4:1, respectively. Under the scheme, rehabilitation assistance is also made available to sick units.