₹3 lakh crore package for MSMEs under Aatmanirbhar Bharat Abhiyaan Explained
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₹3 lakh crore package for MSMEs under Aatmanirbhar Bharat Abhiyaan Explained

Micro Small Medium Enterprises (MSMEs) are vital for the economy in terms of their contribution to the market as they not only positively impact the GDP but also provide generation of employment to more than 11 crore people in the country. In financial year 2019, the total number of MSMEs in the country was more than 63 million. MSMEs have promoted the idea of strong and self-reliant India. MSMEs are classified in two groups, manufacturing enterprises and service enterprises. Manufacturing enterprises, involved in manufacture and production of goods, are defined in terms of investment in plant and machinery. Service enterprises, involved in rendering services, are defined in terms of investment in equipment.

Micro Small and Medium Enterprise (MSMEs) loans is a way to provide effective financial assistance to start-ups and small business owners by financial institutions. It is also being offered under various government schemes such as Mudra Loan, CGTMSE (Credit Guarantee Funds Trust for Micro and Small Enterprises), PMEGP (Prime Minister’s Employment Generation Programme), etc.

The Central Government of India has announced the Credit Guarantee of ₹3 Lakh Crore for Micro, Small and Medium Enterprises (MSME) sector, which is part of the ₹20 Lakh Crore Aatmanirbhar Bharat Abhiyaan (Self-reliant India Scheme) to kickstart the economy amidst the Covid-19 outbreak. Under the automatic loan scheme, banks can charge interest of 9.25%, while non-banking financial companies (NBFCs) can charge up to 14%. The scheme will cover only existing borrowers with outstanding credit limit of up to ₹25 crore as on 29 February 2020, and having a turnover of up to ₹100 crore. It will also include borrowers with up to 60 days past dues, and cover working capital and term loan facilities. The credit line will be 100% guaranteed by the government through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), but no guarantee fee. Banks and NBFCs will offer up to 20 per cent of entire outstanding credit as on 29 February 2020 to MSMEs. The eligible units can take these loans for a tenure of 4 years along with a moratorium of 12 months on principal payment. Further, in a recent notification dated 1st June 2020, Government of India has announced a vision of MSME definition and modalities/ road map for implementing remaining two Packages for MSMEs: (a) ₹20,000 crore package for Distressed MSMEs and (b) ₹50,000 crore equity infusion through Fund of Funds. The package has fully paved way for energising the MSME Sector through entire gamut of Aatmanirbhar Bharat Abhiyaan.

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Package for MSMEs

The Cabinet Committee on Economic Affairs (CCEA) approved the upward revision of MSME definition and modalities/ road map for laying down effective implementation mechanism for remaining two announcements under the Aatmanirbhar Bharat Abhiyaan, which entails:

  1. In the package announcement, the definition of micro manufacturing and services unit was increased to ₹1 crore of investment and ₹5 crores of turnover. The limit of small unit was increased to ₹10 crore of investment and ₹50 crore of turnover. Similarly, the limit of a medium unit was increased to ₹20 crore of investment and ₹100 crores of turnover.
  1. Further, the limit for medium manufacturing and service units has been increased to ₹50 crore of investment and ₹250 crore of turnover.
  2. It has also been decided that the turnover with respect to exports will not be counted in the limits of turnover for any category of MSME units whether micro, small or medium.
  3. Approval for provisioning of ₹20,000 crore as subordinate debt to provide equity support to the stressed MSMEs. This will benefit 2 lakhs stressed MSMEs.
  4. Approval for equity infusion of ₹50,000 crore for MSMEs through Fund of Funds (FoF). This will establish a framework to help MSMEs in capacity augmentation. This will also provide an opportunity to get listed in stock exchanges.

The government has also made several provisions to provide immediate relief to MSMEs in the time of a crashing economy due to the Covid-19 pandemic. The present government is well aware of the importance of MSME’s in India and has made MSME a prominent part in the Aatmanirbhar Bharat Abhiyaan. The upliftment of MSMEs in accordance with reviving the economy is given a priority in the current situation, to provide for such relief these announcements have been made:

Relaxation given to MSMEs


In these unprecedented times of crisis, for the revival of MSMEs and to provide support to such enterprises, the Government of India has launched a technological platform called CHAMPIONS which stands for Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength. The ICT based system ensures hand holding, support, encouragement and grievance redressal by the Government. The system also includes artificial intelligence, data analytics and machine learning.

Objectives of CHAMPIONS to aid growth of MSMEs:

Objective of CHAMPIONS

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How can MSMEs get a loan

(MSMEs)are the backbone of the nation, with India becoming a step closer to self-reliance and with the ideology of ‘Make in India’. The government is encouraging for new businesses and startups to emerge. However, in order for any new business to establish capital is a pre-requisite. In order to procure such capital many startups and small business entrepreneurs seek for loan. Banks and other Non-Banking Financial companies (NBFC) offer such loans, the repayment of these loans defers from the loan amount to the policies of the lender. It is imperative to note that loans provided to MSMEs are unsecured loans as these loans are required to support the finances, infrastructure or other areas of the business. Thus, in order to secure the loan, the applicant seeking such loan has to meet the eligibility criteria.

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Documents required for an MSME loan

  • Identity Proof: Passport, driving licence, PAN card, Aadhar Card, Voter’s identity card.
  • Residence Proof: Passport, lease agreement, trade license, telephone and electricity bills, ration card and GST certificate.
  • Age Proof: Passport, Aadhaar Card, Voter’s identity card, Photo PAN card
  • Bank statement of last 12 months
  • Business registration proof (Partnership Deed, Company Registration Certificate with MoA, AoA)
  • PAN Card of the firm/ company
  • P&L and balance sheet copy of last 2 years
  • GST returns, if applicable

Thus, government is implementing several measures to revive the economy and support the MSMEs by providing loans, infrastructure and technology in these tough times of economic crisis due to the Covid-19 pandemic. These measures by the government are sure to have a positive impact not only to the existing MSMEs but also the upcoming businesses.

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