9870310368 9810688945

Learning

Learning » Startup » How MSMEs benefited from RBI’s loan restructuring: An Insight Story

SP Services

How MSMEs benefited from RBI’s loan restructuring: An Insight Story

Mahiya Ahmad

| Updated: Mar 25, 2020 | Category: MSME Registration, Startup

How-MSMEs-benefited-from-RBI’s-loan-restructuring-An-Insight-Story

Micro Small and Medium Enterprises (MSMEs) small business establishments defined with regards to the size of the investment. For setting up MSME, its registration is mandatory. MSME Registration can be acquired by following certain steps, which will be talked about later in this article.

MSMEs have played a significant role in providing raw materials to the large industries, employment to the semi-skilled workers. They have contributed to the exports and imports of the country at a large extent. Some of these benefits of these enterprises make them an absolute necessity for the country’s economy. If India wants to experience a desirable amount of growth and prosperity in the country, they must provide help to MSMEs.

This sector contributes to 45 per cent of the total employment opportunities in the country, 50 per cent of total exports from India, 29 per cent of total country’s Gross Domestic Product and 95 per cent of total industrial units in the country. Moreover, the Central Government is planning a contribution of $2 trillion from the Micro Small and Medium Enterprises (MSMEs) that will eventually help India in achieving the goal of becoming a $5 trillion economy by the year 2024.

MSMEs consists of three different types, depending on the amount invested in the business.

Category Manufacturing / Production Sector
Micro Enterprises Investment up to Rs 25 lakhs
Small Enterprises Investment above Rs 25 lakhs and up to Rs 5 crores
Medium Enterprises Investment above Rs 5 crores and up to Rs 10 crores
Category Service Sector
Micro Enterprises Investment in equipment up to Rs 25 lakhs
Small Enterprises Investment in equipment more than or equal to Rs 25 lakhs and less than Rs 5 crores
Medium Enterprises Investment in equipment greater than or equal to Rs 2 crores and less than or equal to Rs 5 crores

MSME Schemes

Below mentioned are some of the important schemes that were launched by the Government. The MSMEs must register under the scheme that they find suitable for their business if they want to avail its benefits.

  • UdyogAadhaar memorandum
  • Zero Defect Zero Effect
  • Quality Management Standards & Quality technology Tools
  • Grievance Monitoring System
  • Incubation
  • Credit Linked Capital Subsidy Scheme
  • Women Entrepreneurship

UdyogAadhaar Memorandum

Aadhaar card is a 12 – digit number provided to all individuals by the Government of the country. An Aadhaar card is compulsory for all residents who are the residents of India. The benefit that registration in this scheme provides is the ease in availing credit, loans, and subsidies from the Government. Registration can be easily done in both ways – either online or offline.

Zero Defect Zero Effect

In this model, products that are manufactured for export purposes have to adhere to a certain standard of quality so that they are not rejected or sent back to India. To maintain the standard of the products to the standard set up by the authority, the Government launched this scheme. As per this scheme, if the goods are exported, they are entitled for some amounts of rebates and concessions.

Quality Management Standards & Quality technology Tools

This scheme provides support to the micro, small and medium enterprises by helping them recognize and execute certain standards of quality that are required to be maintained along with the latest technology. Under this scheme, certain activities are conducted to educate the businesses about the new technology launched through various seminars, campaigns etc.

Grievance Monitoring System

Every business, after being in the market for a certain amount of time, start to face issues and complaints from clients, customers and even employees that work in the company. This scheme is, particularly for the business owners. Registering under this scheme is beneficial as it provides ways to deal with the complaints of the business owners and get them resolved. Under this scheme, the business owners can file any complaint, check the status of their complaints if they are not satisfied with the result.

Incubation

This scheme offers a platform to individuals with unique ideas that are unable to execute them. It helps innovators and individuals to implement their new design, ideas or products. According to this scheme, 75% to 80% of the project cost is financed by the Government. This scheme enhances new ideas, designs, products etc.

Credit Linked Capital Subsidy Scheme

This scheme is for all the businesses that are technology deprived. As per this scheme, new technology is provided to the business owners to replace their old and outdated technology. The capital subsidy is given to the businesses to upgrade and have better methods to perform various business activities. The small, micro and medium enterprises can directly approach the banks to avail these subsidies.

Women Entrepreneurship

This scheme is designed for the women of the country who want to start their own business. The Government provides capital, counselling, training and execution techniques to these women so that they get into a better position to manage and perform different business activities and later find innovative methods for their business expansion.

Read, More: RBI Gives a Window of 9 Months for One-Time Restructuring Scheme of MSME Loans.

MSME Schemes for Women Entrepreneurs

  • Trade-Related Entrepreneurship Assistance and Development (TREAD)

As per this scheme, the Government offers up to 30% of the total project cost that is provided by the lending institutions, which finance the rest 70% as a loan to the women. This scheme is highly beneficial for women who are illiterate, poor and those who are unable to provide adequate security as demanded by the bank

  • Mahila Coir Yojna

The major objective of this scheme is to provide women employment in the coir industry. Women are trained for around two months before they start to work as an employee, as decided by the management.

Loans provided to MSMEs

Looking through MSMEs contribution, these enterprises must be provided with the necessities that are required for the growth and expansion of the businesses.

One of the ways the country is providing support to them is by providing these businesses financial aid as per the size of the businesses. Certain loans are created specifically for MSMEs that can be availed only by them.

What is RBI’s loan restructuring?

The News

“The Reserve Bank of India (RBI) has allowed lenders to restructure loans of stressed micro, small and medium enterprises (MSMEs), provided the total fund and non-fund based exposure to a borrower doesn’t exceed ₹ 25 crores as on 1 January 2019”.

The decision of Reserve Bank of India(RBI) to extend the deadline of a one-time restructuring scheme for loans for the worried Micro Small and Medium Enterprises (MSME) clearly came as a relief to the enterprises.

The guidelines said banks should classify stress in such loans into three categories—special mention account (SMA) 0, SMA 1 and SMA 2—depending on the delay in repayment of loans.

While borrowers delaying repayments by up to 30 days must be classified as SMA 0, those delayed by 31-60 days and 61-90 days must classify as SMA 1 and SMA 2, respectively. The loans still remain standard even in these categories and turn bad only after a delay in payment of more than 90 days.

Benefits of loan restructuring

The introduction of demonetization hurt MSMEs and stranded their growth. The loan restructuring will provide these businesses some more time to arrange for the amount that is to be repaid along with planning various strategies to bring back their business on track.

The recast scheme also ensures that MSME loans do not slip into the non-performing asset category that requires 15% provision.

MSME Registration Process

Registering MSMEs is mandatory for the purpose of transparency and accountability of the small and medium industries.

Eligibility criteria for MSME Registration

MSME Registration has specified certain requirements that are mandatory before filing for MSME Registration. Enterprises must fulfil the below criteria to be considered eligible –

  • There must be only one owner of the company and he must be the sole owner of the business
  • The individual must be a part of the Hindu Undivided family
  • The enterprise must be a one-person company
  • The individual has a partnership firm with another party in an

Association

  • The individual owns a limited liability partnership(LLP)
  • The individual runs a private limited company
  • The individual produces materials from his production company
  • The individual is associated with other individuals with regards to the company
  • A co-operative society is named as per the individual or any other

Undertaking

After fulfilling the above-mentioned criteria, the next step is to follow the below steps.

  • An application must be filed with the concerned department of the Government.
  • Specific details are provided about the industry along with the documents
  • Copy of the Aadhar card of the applicant
  • Important details of the applicant, for instance, name, gender, PAN number, email ID and mobile number.
  • Details of the enterprise including name, PAN number of the enterprise
  • Location of the plant where the manufacturing will be undertaken,
  • Date of the commencement of business, the total number of employees.
  • Bank Account Number and IFS Code
  • Primary Business Activity of the business
  • 2 Digit NIC Code
  • Investment in Plant & Machinery / Equipment

Documents Required for MSME Registration

Documents required to register as an MSME must be submitted to the concerned authority before the prescribed time.

  • Copy of Aadhar card of the applicant
  • Name of company or business
  • The kind of corporation
  • Copy of PAN card
  • Address proof of the registered office address
  • Mobile number and Email Address of the applicant
  • NIC code      
  • Number of employees
  • The amount invested in Plant & Machinery or Equipment
  • Certificate of incorporation of the business
  • Cancelled cheque of current bank account
  • Primary business activity of the business

Conclusion

MSMEs are a major part of the economy that is helping the economy flourish and grow. The various plans made and steps taken to support these enterprises are significant for the expansion and success of Micro and Small Enterprises (MSEs). The Government must ensure that the plans are executed in a proper way so that these businesses achieve maximum benefits.

Also, Read: MSME Schemes: Loans Available for Women Entrepreneurs.

  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
Mahiya Ahmad

Mahiya Ahmad is a BBA Graduate from IMT, Dubai and gained a good amount of work experience in Dubai, She has a flair of writing and has a blog of her own too. When she is not writing, reading is one activity she enjoys.

Business Plan Consultant


Request A Call Back

Are you human?: 7 + 1 =

Categories

Startup CFO

Trending Articles

Hey I'm Suman. Let's Talk!