Small business to get easier credit

Why is it in the news ?
  • Amid a broader liquidity crunch, government launched a portal that will sanction a loan to an MSME in 59 minutes.
  • Website psbloansin59minutes.com has been started to provide sanction on loan up to Rs 1 crore within 59 minutes.
  • The move comes at a time when the Micro, Small and Medium Enterprises in the country are facing difficulty in raising funds.
More in the news
    • The measures are aimed at providing GST-registered MSMEs access to cheaper credit by way of an interest subsidy on fresh loans.
    • It mandates state-owned companies to procure at least 25% of their product requirements from smaller firms.
    • Government also lighten some regulations for the MSMEs. These include:
      Filing of single common form for eight labour laws instead of two at present.
      A single approval for environmental clearance to establish a unit, instead of separate approvals needed as of now.
    • Also, MSMEs that are registered on the GST platform will get two per cent interest subsidy on fresh loans.
Mistrust between Banks & MSMEs
    • Traditionally banks have hesitated to grant loans to the sector due to myriad reasons such as their high risk factor owing to their unroganised nature.
    • Their lack of eagerness to get themselves rated; their inconsistent cashflow, and so on among others.
    • If they manage to successfully graduate from the informal to the formal economy, it is presumed that the mistrust between banks and MSMEs could be eliminated.
    • Linking GST data and access to credit under an hour can prove to be a huge booster dose for the sector. 
 
MSMEs
  • Classification : ( As per the MSME development Act 2016 )
      • Micro Enterprise : investment uptoRs.25 lakhs
      • Small Enterprise :Investment above Rs.25 lakhandupto Rs.5 crore
      • Medium Enterprise : investment above Rs.5 crore and upto Rs.10 crore
  • The MSME sector comprises more than 63 million units and employs about 111 million people.
  • The share of MSMEs in GDP is about 30%, with the sector accounting for about 45% of manufacturing output and about 40% of India’s total exports.
Source
Indian Express, ET.


Posted by Jawwad Kazi on 3rd Nov 2018
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