Understanding MSME Interest Subvention Scheme 

The MSME interest subvention scheme launched in 2018, provided an interest relief of 2% p.a. The scheme made the transition to GST easier for MSMEs.

The Ministry of Micro, Small, and Medium Enterprise (MSME) started the Interest Subvention Scheme for MSMEs on the second of November 2018 for scheduled commercial banks. The Ministry of MSME at first chose to execute this plan over the Financial Years (FY) of 2018-19 and 2019-20. However, because of the COVID-19 pandemic, the government authorities broadened this plan for one more year, that is the financial year 2020-21. Consequently, the plan was in force till 31st March 2021.

What are MSMEs?

According to section 7 of the Micro, Small, and Medium Enterprises Development Act, 2006 the Central Government informed the accompanying standards for characterization of micro, small and medium undertakings (“MSME”) through a notice on the first of June, 2020:

(i) a micro enterprise is an enterprise where the investment in Plant and Machinery or Equipment doesn’t surpass one crore rupees and turnover doesn’t surpass five crore rupees

(ii) a small enterprise is an enterprise where the interest in Plant and Machinery or Equipment doesn’t surpass ten crore rupees and turnover doesn’t surpass fifty crore rupees;

(iii) a medium is an enterprise where the interest in Plant and Machinery or Equipment doesn’t surpass fifty crore rupees and turnover doesn’t surpass 200 and fifty crore rupees.

MSMEs are of fundamental importance in the Indian economy and have made a tremendous impact on the financial development of the country. They are one of the significant sources of employment for Indians. It is critical to assist these small-scale businesses in developing.

What is Interest Subvention Scheme?

The term subvention refers to assurance for monetary support. Under the interest subvention scheme, a subsidized rate of interest is given to organizations. This means that the borrower will not have to pay the entire interest accumulated on the loan. Rather, they will have to pay a certain part of it. The remaining portion of the interest would be paid by the government to the lender. Thus, Interest subvention schemes provide a concession to the loan charged allowing organizations to access credits at a lower rate of interest.

The MSME Interest Subvention Scheme

Under the MSME interest subvention scheme, interest relief is given on the outstanding loan/balance of the MSMEs(micro, small and medium enterprises) at the rate of 2% p.a. from the date of disbursal of the loan or the notice date of this plan, whichever is later. 

The interest aid of 2% is given to the MSMEs on the fresh amount of working capital endorsed or new term loans dispensed by the qualified organizations. The interest rates charged by MSMEs shall be in accordance with the Code of Ethics and Fair Practices published by the respective organization.

What is the reason for implementing the MSME interest subvention scheme?

The government had launched the interest subvention scheme to fulfill these objectives:

• To promote the productivity of manufacturing and service industries
• To provide MSMEs with an incentive to onboard GST(goods and services tax)

Who Is Eligible For The MSME Interest Subvention Scheme?

All MSMEs who fulfill the following conditions are eligible to apply for the MSME interest subvention scheme.

• The MSME must have a valid UAN( Udyog Aadhar Number)
• The MSME must have a GST number. An exception to this is the enterprise that is not eligible for obtaining a GST number, these enterprises can register with their PAN cards.
• MSMEs who are already availing of interest subvention under any other policy of the state or the central government are not eligible to apply to this scheme
• MSME exporters who are already availing of interest subvention under the department of commerce for pre-shipment or post-shipment credit are not eligible to apply to this scheme
• Trading activities that don’t have a UAN, are also eligible for this scheme.

Some Salient Features Of The MSME Interest Subvention Scheme

Here, are some of the salient features of the MSME interest subvention scheme that you should know about:

• Thisscheme was launched in 2018 by the honorable prime minister Mr. Narender Modi.
• The nodal agency appointed for channelizing interest subvention is SIDBI
• The lending institutions will be answerable for providing exact and accurate information and monitoring the working of the scheme.
• The case for interest grant will be acknowledged just when it is appropriately confirmed by auditors of lending institutions. In any case, the SIDBI won’t be expected to take responsibility for errors in the cases presented by lending institutions.
• The MSMEs can benefit the sum from interest aid provided that the funds are accessible to the government. Further., MoMSME and the GOI5 are considered the last expert for all interest aid-related matters, and their choice will be binding. 
• The receipt of funds received from institutions is known as utilization certificates of the fund. 

MSME Interest Subvention Scheme – Concluding Thoughts

The fundamental objective behind this MSME interest subvention scheme is to get more individuals on board the GST system, formalize the economy, and cheaper credit. The interest subvention scheme had a significant impact in guaranteeing a smooth change and achieving the mission. 

With Government help, increasingly qualifying units will develop their organizations and add to the public economy. These units will likewise become qualified to participate in any potential help connecting with GST slabs once they get involved in the GST network. It has been theorized that the changes would additionally support the market accessibility of Indian merchandise. The vulnerable portions of the MSME areas will be majorly benefited from this.