Banks instructed to implement interest subvention to MSMEs immediately
According to an instruction by the Reserve Bank of India (RBI), all banks have to now implement the interest subvention scheme for incremental credit to MSMEs immediately, said a KNN report. RBI issued a notification in which it instructed banks to ‘take appropriate action as envisaged’ and also ‘issue necessary instructions to [their] branches/controlling offices for successful implementation of the scheme.’
Recently, the Ministry of MSME had issued operational guidelines for implementing an interest subvention scheme for MSMEs, adding that interest relief will be calculated at two percent points per annum.
The interest subvention scheme aims to promote productivity of manufacturing and service enterprises. The scheme also provides incentives to MSMEs to get onboard the GST platform. On a large scale, this in accordance with the formalisation of the economy while reducing the cost of credit. Further, the scheme will operate for two financial years, namely, FY 2019 and FY 2020.
The two percent interest relief from the banks will be calculated on the incremental amount of working capital credit or incremental term loan. It will apply on loans disbursed to MSMEs from the date of disbursal/draw or date of notification of this scheme, whichever is later.
Further, the benefit of the scheme will be available to those MSMEs who have a valid Udyog Aadhar number, a valid GSTN Number, and the term loan or working capital extended by Scheduled Commercial Banks and RBI-registered systemically important Non-Banking Finance Companies.
The move comes a few months after Prime Minister Narendra Modi announced a two percent interest subvention for all GST registered MSMEs on fresh or incremental loans. The government had also decided to increase interest subvention on pre- and post-shipment credit from three to five percent.
ALSO READ:
PM Modi’s Support Programme: What MSMEs are saying
Steps to help MSMEs will increase risk of fiscal slippage: Moody's Investors
MOST VIEWED STORIES
