The MSME (Micro, Small and Medium Enterprises) sector contributes significantly to both the nation’s economic and employment prospects. The Interest Subvention Scheme for MSMEs was introduced as a part of the support and outreach initiatives accorded to the segment.
The scheme is introduced with the objective of encouraging the manufacturing and service enterprises to enhance their productivity, as well as to provide incentives to MSMEs for enrolling into the GST platform.
Scope of Coverage
MSME’s in possession of the following would be counted as beneficiaries under the scheme:
- Valid Udyog Aadhar Number (UAN)
- Valid GSTN Number
The scheme would be applicable to:
- The grant of incremental term loan/fresh term loan/incremental working capital during the relevant financial years.
- The term loan/working capital extended by Scheduled Commercial Banks and RBI Registered Systematically Important Non-Banking Finance Companies (NBFCs).
- All eligible working capital or term loan would be covered for up to Rs. 100 lakhs for ensuring optimal coverage and outreach.
It may be noted that if a single MSME is the recipient of incremental working capital and term loan, interest subvention would be made available for maximum financial assistance of Rs. 100 lakhs.
MSME exporters receiving interest subvention for pre-shipment or post-shipment credit under the Department of Commerce wouldn’t qualify for assistance under this scheme. Also, the scheme wouldn’t apply for MSMEs receiving interest subvention under any of the Schemes of the State/Central Government.
The interest relief provided under the scheme would be calculated at two percentage points per annum. This calculation would be performed on the incremental amount of working capital credit or incremental/new term loan disbursed by eligible institutions to eligible MSMEs from the date of disbursal/drawal or the date of notification of this scheme – whichever is later, computed on outstanding balance on a periodical basis, received or recovered by the lending institution.
The interest rates levied on MSMEs must be in accordance with the Code of Ethics and Fair Practices Code as published by the respective institutions. Also, it must be linked to the respective rating of the MSME as per the internal/external rating and applicable interest rate guidelines of the institution.
The loan accounts on the date of filing the claim shouldn’t have been declared as a Non-Performing Asset (NPA) as per the extant guidelines in force. No interest subvention is permitted for any period during which the account remains a Non-Performing Asset (NPA).
Half Yearly Claims
Nodal lending institutions are required to furnish their half-yearly claims as per the format specified in Annex I, and the information pertaining to the loans disbursed and interest relief claimed (branch-wise) must be submitted in soft copy in the format specified in Annex II.
The format wherein the individual branches of the eligible institutions are required to provide information is provided in Annex III. The data captured for this purpose must be branch wise, category wise, and sector wise. On the same note, it must include the demographic, social and economic data of the beneficiaries, incremental working capital limit/incremental/new term loan.
All these claims must be duly certified by the statutory auditors of the qualifying institutions, and in the certificate, a statement on the verification of individual accounts concerning the amount, incremental lending, interest charge and amount claimed must be included. Lending institutions must ensure that the total relief claimed as provided in Annexure I, II and III are matching with each other.
The Half-yearly claims are to be submitted to the Chief General Manager, Institutional Finance Vertical, SIDBI, Mumbai. The disbursement against each claim to the individual institution can only be made after the Ministry of MSME releases the funds.
Small Industries Development Bank of India (SIDBI) has been designated as the Nodal Agency for channelizing interest subvention to the various lending institutions through their Nodal office. The financial body would be entitled to a fee of 0.25% per annum on the amount released, which is to be used for administering the scheme.
It may be noted that the interest subvention would only be released if the claim is duly certified by the Statutory Auditors of the qualifying institutions. As stated by the MCA, SIDBI wouldn’t be liable for any inaccurate submission of the lending institutions. Moreover, the disbursal of funds would be done on the basis of its availability. The Ministry of MSME would be the decision-making authority for all matters concerned with interest subventions. The receipt of the fund by the eligible institutions would be treated as Utilization Certificate of the Fund.
The scheme would be monitored by the Governing Board, chaired by the Additional Secretary and Development Commissioner, Ministry of MSME. The Board is entrusted with the responsibility of framing the policy guidelines and issuing necessary directions for the smooth functioning of the Scheme.
The scheme would be operated by SIDBI as per the defined guidelines and directions. It would also suggest the modalities for the submission of subsidy claims.