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Fiscal Boost For MSME

Union Minister Finance Nirmala Sitharaman has announced several relief measures for MSME Sector.

She announced on 13 May that in order to provide relief to the business, additional working capital finance of 20 Percent of the outstanding credit as on 29 February 2020, in the form of a Term Loan at a concessional rate of interest will be provided.
This will be available to units with up to Rs 25 crore outstanding and turnover of up to Rs 100 crore whose accounts are standard. 
The units will not have to provide any guarantee or collateral of their own. The amount will be 100% guaranteed by the Government of India providing a total liquidity of Rs. 3.0 lakh crores to more than 45 lakh MSMEs.
Provision made for Rs. 20,000 crore subordinate debt for two lakh MSMEs which are NPA or are stressed. Government will support them with Rs. 4,000 Cr. to Credit Guarantee Trust for Micro and Small enterprises (CGTMSE).
Banks are expected to provide the subordinate-debt to promoters of such MSMEs equal to 15% of his existing stake in the unit subject to a maximum of Rs 75 lakhs.
Union Government will set up a Fund of Funds with a corpus of Rs 10,000 crore that will provide equity funding support for MSMEs.
The Fund of Funds shall be operated through a Mother and a few Daughter funds. It is expected that with leverage of 1:4 at the level of daughter funds, the Fund of Funds will be able to mobilize equity of about Rs 50,000 crores.
Definition of MSME will be revised by raising the Investment limit.
Additional criteria of turnover also being introduced and the distinction between manufacturing and service sector will also be eliminated.
 e-Market linkage for MSMEs will be promoted to act as a replacement for trade fairs and exhibitions. MSME receivables from Government and CPSEs will be released in 45 days
 


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