Government Schemes Launched for MSME Funding in India

According to reports released by the Reserve Bank of India, India’s MSME sector has been consistently contributing to about 30% of the country’s total GDP since 2012. This sector, as the MSME full form suggests, comprises the country’s Micro, Small and Medium Enterprises. 

These industries have steadily expanded their domain across various sectors in the economy by producing a diverse range of services and products. This endeavour of these companies has been supported by various Government schemes, launched in the past few years, to provide funding to support their operations and fund growth.

These government-backed schemes were introduced to further bolster the efforts of MSME’s across the country and offer various benefits to cater to their requirements.

Following is a list of the more popular schemes introduced by the government and the advantages they can offer to the organisations in this sector.

  1. Credit Guarantee Scheme

This scheme, offered by the Development Ministry of Micro, Small and Medium Enterprises, is available for new and existing companies to help them gather working capital and fund other aspects of the business. 

The Credit Guarantee Scheme is operated under the joint efforts of the government, Ministry of MSME and Small Industries Development Bank of India (SIDBI). Further, a Credit Guarantee Fund Trust for Micro and Small Enterprises has been established to implement this scheme. 

Features of this scheme – 

  • These are unsecured advances and do not require the businesses to pledge any collateral to avail credits. Make sure you learn about the pros and cons of a business loan without collateral before availing this advance.
  • As the MSME full form suggests, this loan of up to Rs. 50 Lakh can be availed by individual Micro, Small and Medium Enterprises, under this scheme.
  • If a company under this scheme becomes non-operational due to reasons that are not in control of the organisation, the scheme will provide assistance to rehabilitate it.

This loan comes with an initial tenor of 5 years and can be increased in periods of 5 years. 

  1. Credit Linked Capital Subsidy Scheme

This was implemented by the government in an effort to boost the MSME sector through technological upgradation. The principal aim of this scheme is to increase the sector’s contribution to GDP from the present 29% to 50% in the near future.

Offerings under this scheme – 

  • It offers a capital subsidy of 15% on an advance of up to Rs. 1 Crore availed by MSMEs, including village, Khadi and coir sectors.
  • This advance is offered for the induction of technology on 51 products/sub-sectors.

MSMEs can avail the subsidy under this scheme by applying online through Primary Lending Institutions offering these term loans.

  1. Pradhan Mantri MUDRA Yojana

MSME full form stands for Micro, Small and Medium Enterprises and to solidify their hold on the Indian economy, the government has introduced the Pradhan Mantri MUDRA Yojana. Under this scheme, organisations belonging to the non-corporate and non-financing sector can avail an advance of up to Rs. 10 Lakh from various financial institutions. 

There are three products under this scheme, namely – 

  • Sishu – for MSME loans of up to Rs. 50,000.
  • Kishor – for an advance of up to Rs. 5 Lakh.
  • Tarun – for loan sanctions of up to Rs. 10 Lakh.

But to avail MSME loan, prospective borrowers have to fulfil certain eligibility criteria.

Apart from these schemes, the government also offers advances under the Prime Minister’s Employment Generation Programme, Interest Subsidy Eligibility Certificate, etc. for funding the initiatives of MSMEs.

Alternatively, these organisations can choose to opt for other advances offered by financial institutions like Bajaj Finserv to gather funding for their businesses. This feature-rich Business Loan offers a high loan amount value of up to Rs. 30 Lakh, with flexible tenor, instant processing and fast disbursal facilities.