Credit Guarantee Scheme to Small Businesses
Credit Guarantee Fund Scheme for SME in India: Majority of workers in India work in micro, small and medium enterprises (MSME) categorized unorganized sector. For economy of India, MSME is very important. The MSME finds it hard to get credit which sometimes leads to closure of the units. And ultimately workers are rendered jobless. With a view to helping small industries and employment generation, Government of India has taken several steps.
In an effort to help MSME tide over the liquidity problem in order to successfully run the business, Prime Minister Narendra Modi has announced enhancement in credit limit on 31st December.
Aims of the Scheme
- It is aimed to help small businesses with timely and adequate credit at reasonable interest rate.
- To help micro enterprises and first-time entrepreneurs securing small loans for the business.
- The credit Guaranteed Fund Scheme paves a way for collateral free credit to the micro and small business. It is very difficult for small entrepreneurs to find collateral.
Features of the Scheme
- The credit limit is now Rs 2 crore which was 1 crore earlier.
- In the scheme, earlier the credit was given for bank loans only, now it is provided for non-banking financial institutions too.
- As the government bears the cost of underwriting the loan, the bank or financial institutions won’t charge high interest on these loans.
- The benefit of the scheme is available to new as well as existing small businesses.
- The government has also has asked the banks to increase credit limit to small industry from current 20% of turnover to 25%. It also has asked the banks to raise working capital loans from existing 20% of turnover to 30% to the industries which make transactions digitally. Even the banks have been directed to consider deposit made by the small sector in last few weeks to be consideredEven the banks have been directed to consider deposit made by the small sector in last few weeks to be considered as working capital.
The government is also providing several other benefits to small industries. A major tax relief has been provided to them. For annual turnover of the business up to Rs 2 crore, the tax levied will be 8% of the turnover. Moreover, for the business income through
A major tax relief has been provided to them. For annual turnover of the business up to Rs 2 crore, the tax levied will be 8% of the turnover. Moreover, for the business income through the digital transaction, the tax is further reduced to 6% of it.
Credit Guarantee Fund Trust for Micro and Small Enterprises has been established by the Ministry of Micro, Small and Medium Enterprises and Small Industries Development Bank of India (SIDBI), which implements the scheme.
More information about the credit guaranteed scheme can be obtained at www.cgtmse.in .
The enhanced credit guarantee to MSME will prove beneficial to not only MSME but also pave the way for efficient business, new jobs, and a prosperous nation!
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