New credit cover MSME exporters by September
NEW DELHI : The Indian government is set to launch a new credit guarantee scheme for export-oriented MSMEs by September, offering collateral-free loans of up to ₹20 crore per borrower.
The Centre will prepare the draft of the new credit guarantee scheme for export-oriented MSMEs in a month, covering collateral-free loans of up to Rs 20 crore per borrower.
Under this scheme, it may guarantee up to 95% of loans for micro and small enterprises and up to 75% for medium enterprises. The guarantee fee for borrowers may be around 1.5%, sources told FE.
“The target is to roll out the scheme by September,” a senior official said, adding that the scheme will be in place for six years or till the end of the 16th Finance Commission award cycle ending FY31.
The department of financial services has already held several rounds of discussions with MSME representatives and banks after finance minister Smt. Nirmala Sitharaman announced the launch of a credit guarantee scheme for “for well-run exporter MSMEs, for term loans up to Rs 20 crore.”
This would be the first of its kind scheme for MSME exporters. The credit facility will be offered to meet the borrower’s working capital requirements, as well as for expansion projects, in the form of term loans.
Currently, there is no such credit guarantee scheme catering to export-oriented MSMEs. The Export Credit Guarantee Corporation (ECGC) provides risk cover against export orders as a packing/post shipment facility.
However, these borrowers have other working capital needs also which they avail as cash credit and overdraft facilities from banks, which are not covered by ECGC. Further, EOUs will also need term loans for expansion, modernisation or setting up new units for which credit guarantee scheme is not available.
The new scheme for EOUs is likely to be managed by the National Credit Guarantee Trustee Company Limited (NCGTC). The credit guarantee scheme would facilitate the increase in exports, helping to earn foreign currency and strengthening the economy.
Over 1 crore registered MSMEs, employing 7.5 crore people, and accounting for 36 per cent of the country’s manufacturing and 45% of exports Growth and stability of MSME sector is important to further our position as a global manufacturing hub Increase in in both investment criteria and turnover across all categories of MSMEs, viz. Micro, Small and Medium.
Interest rate on these facilities can be charged as per board board-approved policies of the lender and as per regulatory guidelines. However, it is expected that the interest rates charged will be competitive to account for the reduced risk levels due to the guarantee cover offered to the credit facility.
At the initial launch stage, it is proposed to roll out the guarantee scheme for EOUs. However, at a later stage with the stabilization of the scheme, it is proposed to include units which facilitate import substitution, also to avail the benefits of the scheme.
Source : Financial Express
