MSMEs Initiatives

The MSME (Micro, Small & Medium Enterprises) sector has been hit badly during the COVID pandemic. The Government of India though had initiated timely measures in 2020, this COVID pandemic period has been a difficult phase for the MSMEs. The Union Budget 2022 has further brought a fresh array of hope for the revival and sustainability of MSMEs. The Union budget presented by Finance Minister has laid emphasis on inclusive finance, digital transformation, and sustainability. The various initiatives can potentially have a short and longer-term positive impact on MSMEs and the startup ecosystem in the country. 

Budgetary allocations 

Amongst the various initiatives for the MSMEs sector, one key highlight was the increase in budgetary allocation for MSMEs from last year’s Rs 15,699 to Rs 21,422 crores, which is up by 26.71%. 

The Prime Minister Employment Generation Programme (PMEGP) has seen a significant increase in allocation from Rs 12,499 to Rs 17,600 crores, an increase of 29%. Entrepreneurship and skill development schemes allocation also increased from Rs 571 to Rs 718 crore (a 20.48% increase). Within this, the Fund of Funds has got Rs 486 crores, from Rs 350 crores earlier. Similarly, other sub-schemes have also seen a hike. FM has significantly hiked the allocation for the Total-Infrastructure Development Programme — from Rs 1,107 to Rs 1,596 crores.  

A fresh allocation of Rs 262 crore has been made for the Micro and Small Enterprises Cluster Development Programme (MSE-CDP). Recognising the need for skilling and technology up-gradation, fresh allocation of Rs 235 crores and Rs 205 crores has been made for tool rooms and technical education, and the ‘Technology Centre Systems Programme’ (TCSP) respectively. The Technology Upgradation and Quality Certification scheme has seen a reduction in allocation. 

New Initiatives 

Budget 2022 has taken various initiatives for MSMEs, which have been discussed below: 

(i) Interlinking key portals. India’s MSME sector has been witnessing encouraging strides towards digitisation. The Government announced the UDYAM, e-SHRAM, and National Career Service (NCS), with an intent to help widen the scope of services they offer.  

The intent of e-Shram was designed to develop a nationwide database of unorganised labour, while Udyam portal for registering enterprises as MSMEs and NCS provided online job search, job matching, career counselling, vocational coaching, information on skill development courses, internships, and other employment-related services. While the ASEEM portal has been serving as a platform for the supply of skilled workers as per market demands. 

Consequent to the interlinking, these portals will be equipped with live organic databases providing G2C (Government to Consumer), B2C (Business to Consumers), and B2B(Business to Business) services. This initiative of the government is aimed at addressing the demand for skilled manpower and credit facilitation. Thus, financial institutions will benefit to mitigate risks in a better way, and in turn, enhance credit flow and credit outreach to MSMEs. 

(ii) Revamp of Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme.  This is another welcome measure for the MSME sector. Credit guarantee trust for MSMEs will be revamped and have the allocation of Rs 2 lakh crores more. This in turn will have confidence building for the Banks to expand credit to the MSME sector basis the credit guarantee of trust. 

(iii)Extension of Emergency Credit Line Guarantee Scheme. This was introduced in 2020, and has been extended for one more year till March 2023. The guarantee amount has also been enhanced by Rs.50,000 crores to Rs.5 trillion.  

(iv) Raising and Accelerating MSME Performance (RAMP) program. This has been launched with an outlay of Rs 6,000 crores over five years, aimed at improving the competitiveness and efficiency of the sector, enabling them to become part of global value chains. This has an allocation of Rs 723 crores in FY’23. RAMP will help MSMEs to recover from the impact of the pandemic.  

(v) Accelerating Financial inclusion & strengthening Agri-MSME value chain. The tech-driven initiatives in rural areas such as Kisan drones, digital high-tech services to farmers, up-gradation of 2 lakh Anganwadis, core banking solution for 1.5 lakh post offices, digital banking units in 75 districts, e-VIDYA for 200 TV channels, change of syllabus in agricultural universities, etc are aimed at achieving financial inclusion in the countryside. This will give a boost to productivity in the rural economy. 

The Government will integrate 100 per cent of the 1.5 lakh post offices in the country into the core banking system as part of the Budget’s initiatives to increase financial inclusion. For the promotion of digital infrastructure, a DESH-stack e-portal will be launched. 

The setting up of the Centre for Processing Accelerated Corporate Exit (C-PACE) which aims to reduce the voluntary winding–up time from the current 2 years to 6 months will encourage MSME to come on board the formal fold.  

Also, a greater focus on sectoral thematic funds in agriculture, health and deep-tech, higher allocation to NABARAD, and the formation of committee to study various issues in the ecosystem should go a long way in strengthening the foundations for MSMEs. 

(vi) Timely receivables payment for MSMEs. This remains a challenge for MSMEs as payments from the buyers get blocked for an unduly long period, impacting their liquidity. In the case of government procurement, 75% of the running bill of MSMEs will be paid within 10 days. Provision for an end-to-end platform to submit and manage e-bills for government contracts and commitment to paying 75% within 10 days for running bills will help improve liquidity for MSMEs. 

 Besides, the introduction of surety bonds for suppliers brings in a lot of advantages as it ensures that the critical cash reserves of MSMEs are not blocked-in financial guarantees thereby enabling a sustained cash flow. 

 (vii) Tax benefits. The Union budget has given leeway to investors in equity shares of start-ups by capping the surcharge at 15%, extending of tax holiday. The Union government has decided to extend custom duty exemption on the import of steel scrap by a year. 

(viii) Thrust in sunrise sectors. The government’s thrust in sunrise sectors and opening up of the defence sector to domestic suppliers is a great opportunity for entrepreneurs and enterprises in the broader start-ups and MSME ecosystem. Start-ups and MSMEs can benefit immensely from the policies which are likely to be announced in sunrise sectors like e-mobility, batteries, artificial intelligence, climate change, semi-conductors, space economy, genomics etc.  

(ix) Other Budgetary Initiatives Impacting MSMEs. With digitisation gaining great momentum, it is inevitable for MSMEs to deliver their products quickly and efficiently. PM GatiShakti master plan, encompassing the development of roads, ports, railways, airports, mass transport, waterways, and logistic infrastructure, aimed at creating a world-class modern infrastructure to facilitate “seamless multimodal connectivity and logistics efficiency” shall help MSMEs bring down logistical costs and time. The development of 25,000 kilometres of national highways, cargo terminals, multimodal logistics park, and the one station-one product idea of railways will undoubtedly boost the local business and supply chains.  

Conclusion 

The Union Budget 2022 continues to provide much-needed support to MSMEs. It is important that the blueprint laid down by the government materialises in a time-bound manner to create an Amrut Kaal of the next 25 years for the MSMEs, to realize the government’s vision of making the MSME sector contribute 50 per cent to India’s GDP by 2025.

The government of India has the portal for MSMEs registration with website link as under:https://udyamregistration.gov.in/Government-India/Ministry-MSME-registration.htm
The MSMEs registration (Udyam Registration number) enables these enterprises to avail the benefits under the various schemes launched by the GoI. A lot of awareness amongst the MSMEs needs to be built up for these multiple benefits available to them, once they have the Udyam Registration number.

 Collateral Free loans from banks: Any collateral / third party guarantee free credit facility (both fund as well as non-fund based) extended by eligible financial institutions, to new as well as existing Micro and Small Enterprise, including Service Enterprises, with a maximum credit cap of Rs 200 lakh are eligible to be covered under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).

Subsidy on Patent Registration: The subsidy can be availed for patent registration by giving applications under the National Manufacturing Competitiveness Programme.

Protection for Micro & Small Enterprises against Delayed Payments: If the buyer delays the payment for more than 45 days after accepting the products or services then MSEs suppliers may approach the Micro and Small Enterprises Facilitation Council (MSEFC) constituted under the Act in all State/UTs. U/ S 16 of MSMED Act, delayed payment to supplier units, attracts compound interest with monthly interests at three times of the bank rate notified by the Reserve Bank.
Lower Electricity Bills: Concession is available to all the MSME enterprises that have the MSME registration certificate on their application to the department of electricity along with the certificate of registration.

ISO Certification Cost Reimbursement: The scheme is applicable to those Micro & Small (Manufacturing/ Service) Enterprises that have already acquired ISO-9000/ISO-14001/ HACCP certification from NABCB registered Certifying Body. Expenditure for the training for ISO Certification will also be reimbursable if they are by approved consultants. Under the scheme reimbursement available of charges for acquiring ISO-9000/ISO-14001/HACCP certifications to the extent of 75% of the expenditure subject to a maximum of Rs. 75,000/-.

Market Development Assistance (MDA) Scheme: The government of India under this scheme offers funding for participation by registered manufacturing Micro & Small Enterprises in International Trade Fairs/Exhibitions under MSME India stall. Reimbursement eligibility is of 75% of airfare by economy class and 50% space rental charges under General category entrepreneurs and for women/SC/ST entrepreneurs & entrepreneurs from North-Eastern Region, up to 100% of space rent and economy class airfare. The total subsidy is restricted to Rs.1.25 lakh per unit.

Bar Code registration subsidy: Bar Coding not only facilitates the exchange of information between buyers and sellers but also provides the potential for better visibility and sharing of information across an entire Supply Chain. Enterprises that have MSME Registration can avail of Bar Code Registration subsidy which envisages providing 75% of the one-time registration fee and annual recurring fee (for the first three years) paid.

Subsidy on Credit ratings: NSIC is the nodal agency for implementing the scheme of performance and credit rating for Micro & Small Enterprises. Enterprises that have MSME Registration can avail Subsidy on NSIC Performance and Credit ratings. Under this Scheme, the rating fee payable by the micro and small enterprises is subsidized for the first year only and that is subject to a maximum of 75% of the fee or Rs. 40000/- whichever is less. More than 30 banks / financial institutions have signed MOU with the Rating Agencies / NSIC to extend the benefits to the units rated under the Scheme.

Access to Tenders: The Government comes out with tenders that are open only to MSMEs with an objective to promote MSMEs in India. Further, the Government has decided that global tenders will be disallowed in procurement up to Rs 200 crores.

 15% subsidy under Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Upgradations: The objective of the scheme is to facilitate technology up-gradation in Micro and Small Enterprises (MSEs) by providing an upfront capital subsidy of 15 percent (limited to a maximum Rs.15 lakhs) on institutional finance of up to Rs 1 crore availed by them, for induction of well-established and improved technology in the specified 51 sub-sectors/products approved. In essence, the major objective is to upgrade their plant & machinery with state-of-the-art technology, with or without expansion, and for new MSEs which have set up their facilities with appropriate eligible and proven technology duly approved under scheme guidelines. The list of Technologies is available at www.dcmsme.gov.in. Online Application and Tracking System has been introduced w.e.f. 01.10.2013. To claim subsidy under CLCSS, eligible MSEs are required to apply online through Primary Lending Institutions (PLIs), from where the MSEs avail term loan.

Public Procurement Policy for MSEs: Every Central Ministry /Department / PSU shall set an annual target for 25% procurement from MSE Sector. A sub-target of 4% out of 25% target of annual procurement earmarked for procurement from MSEs owned by SC/ST entrepreneurs. Overall procurement goal of a minimum 25% has become mandatory from 1st April 2015. Tender sets are free of cost and exempt from payment of earnest money to registered MSEs. MSEs quoting price within price band L-1 + 15%, when L1 is from someone other than MSE, shall be allowed to supply at least 25% of the tendered value at L-1 subject to lowering of price by MSEs to L-1. 358 items are reserved for exclusive procurement from MSEs.

 Availing Invoice payment by MSMEs under TReDS platform: TReDS (Trade Receivables Discounting System) is an institutional mechanism set up to facilitate the discounting of invoices for MSMEs from corporate buyers through multiple financiers. Invoice discounting on TReDS involves three participants MSME Supplier, Corporate Buyer, and Financier. The invoice is uploaded by either buyer or supplier depending on the method of discounting and is approved by the other party. Once the invoice is approved the financiers on the platform start to bid on the invoice. The supplier accepts the bid, and the discounted amount is credited in its account in T+1 day, where T is the day of acceptance.

Raw material Assistance Scheme aims at helping MSMEs by way of financing the purchase of Raw Material (both indigenous & imported). This gives an opportunity to MSMEs to focus better on manufacturing quality products. Entrepreneurs and any MSME needing raw material through National Small Industries Corporation (NSIC) may apply to any of the NSIC field offices for Raw Material Assistance in the prescribed application forms, which can be downloaded from NSIC’s website (www.nsic.co.in). Any manufacturing MSME having a Udyam Registration number can apply for assistance under the Scheme. More details can be found at: http://www.nsic.co.in/pdfs/FAQ_RMA_102016.pdf

  As per data available on the Government website https://udyamregistration.gov.in, as of 29th December 2021(3 pm), the total registered MSMEs are at 63,40,898. This is as compared to my earlier Blog, which gave the data as of 30th September 2021(11 am), for the total registered MSMEs at 50,14,706. There is an addition of 13,26,192 in about a 3-month period. Looking at 63 million MSMEs in the country as per MSME Ministry report 2019-20, the MSMEs must pace up for getting the Udyam Registration number. GoI has simplified the registration process for MSMEs with zero fees for the registration on their website.

Government of India has the portal for MSMEs registration with website link as under: 

https://udyamregistration.gov.in/Government-India/Ministry-MSME-registration.htm.This portal gives an important notification for MSMEs: “Except this portal of Government of India and Government’s Single Window Systems, no other private online or offline system, service, agency or person is authorized or entitled to do MSME Registration or undertake any of the activity related with the process.” 

While going ahead with registration on above portal, it is important to understand the present classification (2020) for micro, small or medium enterprise applicable uniformly for the manufacturing or services activities based on the following criteria. 

(i) micro enterprise: where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees. 

(ii) small enterprise: where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees. 

(iii) medium enterprise:  where the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees. 

Key features of Registration Process: Udyam Registration 

Government has highlighted the facts related to Registration Process, which are important and shows as to the easiness & transparency of this process. The Registration Process is totally free, and no Costs or Fees are to be paid to anyone. 

• An enterprise for the purpose of this process will be known as Udyam and its Registration Process will be known as ‘Udyam Registration’ 
• MSME registration process is fully online, paperless and based on self-declaration. 
• Having PAN and GSTIN (As per applicability of CGST Act 2017 and as notified by the ministry of MSME vide S.O. 1055(E) dated 05th March 2021) is required for Udyam Registration with effect from 01.04.2021. 

• PAN & GST linked details on investment and turnover of enterprises will be taken automatically from Government data bases. 
• Aadhaar number shall be of the proprietor in the case of a proprietorship firm, of the managing partner in the case of a partnership firm and of a karta in the case of a Hindu Undivided Family (HUF). 
• In case of a Company or a Limited Liability Partnership or a Cooperative Society or a Society or a Trust, the organisation or its authorised signatory shall provide its GSTIN and PAN along with its Aadhaar number. 
• No documents or proof are required to be uploaded for registering an MSME. 
• Whoever intentionally misrepresents or attempts to suppress the self-declared facts and figures appearing in the Udyam Registration or updation process shall be liable to such penalty as specified under section 27 of the Act. 

• All existing enterprises registered under EM–Part-II or UAM registration or any other registration issued by any authority under the Ministry of MSME, will have to register again on the Udyam Registration portal on or after the 1st day of July 2020. 
• No enterprise shall file more than one Udyam Registration. However, any number of activities including manufacturing or service, or both may be specified or added in one Registration. 
• A permanent registration number will be given after registration. 
• After completion of the process of registration, a certificate will be issued online. 
• This certificate will have a dynamic QR Code from which the web page on our Portal and details about the enterprise can be accessed.  

Key aspects on the updating of information and transition period classification 

For a growing MSME enterprise, it is important to understand the clauses relating to transition period classification because of the changes taking place in amount of investment in plant & machinery or equipment or turnover or both. 

• An enterprise having Udyam Registration number shall update its information online in the Udyam Registration portal, including the details of the ITR and the GST Return for the previous financial year and such other additional information as may be required, on self-declaration basis.  
• Failure to update the relevant information within the period specified in the online Udyam Registration portal will render the enterprise liable for suspension of its status.  
• Based on the information furnished or gathered from Government’s sources including ITR or GST return, the classification of the enterprise will be updated. 
•  In case of graduation (from a lower to a higher category) or reverse-graduation (sliding down to lower category) of an enterprise, a communication will be sent to the enterprise about the change in the status. 
• In case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent reclassification, an enterprise will maintain its prevailing status till expiry of one year from the close of the year of registration.  

• In case of reverse-graduation of an enterprise, whether as a result of re-classification or due to actual changes in investment in plant and machinery or equipment or turnover or both, and whether the enterprise is registered under the Act or not, the enterprise will continue in its present category till the closure of the financial year and it will be given the benefit of the changed status only with effect from 1st April of the financial year following the year in which such change took place. 

Benefits available to Registered MSMEs 

Government of India has been promoting MSMEs because of their significant role in economic growth, and employment generation. This relates to number of benefits such as (i)Collateral Free loans from banks;(ii) Subsidy on Patent Registration; (iii) Protection for Micro & Small Enterprises against Delayed Payments;(iv) Lower Electricity Bills;(v) ISO Certification cost Reimbursement;(vi) Market Development Assistance (MDA) Scheme;(vii) Bar Code registration subsidy;(viii) Subsidy on Credit ratings ;(ix) Access to Tenders;(x) 15% CLCSS subsidy and, few more incentives. 

Conclusion 

It is in the interest of MSMEs themselves to obtain the Udyam Registration number at the earliest possible through the online simplified process detailed above.  

As per data available on the Government website https://udyamregistration.gov.in, as on 30^th September 2021(11am), the total registered MSMEs are at 50,14,706. Out of which 47,11,111 are Micro enterprises, 2,71,972 Small enterprises and 31,623 Medium enterprises. Considering that there are 63 million MSMEs in the country as per MSME Ministry report 2019-20 (based upon National Sample Survey available data), indicates that there is a need for accelerating the registration pace for MSMEs.

The Micro, Small, and Medium Enterprises (MSME) contribute significantly to the economic and social development of the Indian economy through fostering entrepreneurship and generating large employment opportunities at comparatively lower capital costs, next only to agriculture. MSMEs undoubtedly are complementary to large industries as ancillary units. MSME sector thus contributes significantly to the inclusive industrial development of the country. In the true sense, MSMEs are amongst the strongest drivers of economic development, innovation, and employment.
The MSMEs have come under a great challenge under the COVID pandemic. To overcome this challenging situation, there have been some encouraging steps by the Government in the recent past aimed at reviving and sustaining the growth of the MSMEs. Let me first talk about these initiatives.

Upward revision in definition ceilings for MSMEs
The much-awaited decision on the revision of the definition Micro, Small and Medium Enterprises (MSME), which came into effect with the FM announcement in 2020, has been a welcome decision. The old definition of MSMEs as per MSMED Act, 2006 since got revised in 2020 as below:
(i) a micro-enterprise, where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees.
 (ii) a small enterprise, where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees
(iii) a medium enterprise, where the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.
The objective behind the move to shift from a definition based on investment in plant & machinery to the composite criteria of both investment and annual turnover was to incentivize entities to modernize without worrying about losing their MSME status.
 
Liquidity Support to MSME via Emergency Credit Line Guarantee Scheme (ECLGS)
Government operationalized Rs. 3,00,000 crore collateral-free loan scheme, with an intent to benefit 45 lakh MSMEs. Of which Rs 20,000 crore was made available as subordinate debt for stressed MSMEs. The scheme is a specific response to the unprecedented situation arising out of COVID-19.
•      Under ECLGS 1.0, an emergency credit line was offered to MSMEs and other businesses from banks and NBFCs up to 20% of their entire credit outstanding as of February 29, 2020. MSMEs with up to Rs 25 crore outstanding and Rs 100 crore turnover were eligible. However, the turnover cap was removed post amendment in November 2020. Repayment of principal and interest under ECLGS 1.0 was in 36 months.
•      ECLGS 2.0 was amended on November 26, 2020. The amended version focused on entities in 26 stressed sectors identified by the Kamath Committee along with the healthcare sector with credit outstanding of more than Rs 50 crore and up to Rs 500 crore as of February 29, 2020. The scheme also mandated borrower accounts to be less than or equal to 30 days past due as of February 29, 2020, that is, they should not have been classified as SMA 1, SMA 2, or NPA by any of the lenders as of February 29, 2020
•      Under ECLGS 3.0 announced in March 2021, the government intended to cover enterprises in hospitality, travel & tourism, leisure & sporting sectors as well and had extended the overall emergency credit scheme including the previous two versions by three months from March 31, 2021, till June 30, 2021, or until guarantees for the entire Rs 3 lakh crore amount are issued.
•      Also, Finance Ministry extended its scope to cover stressed businesses that have loan dues for up to 60 days (SMA-1 accounts), vis-a-vis 30 days earlier (SMA-0).
•      Government also removed the limit of Rs 500 crore loan outstanding for eligibility under ECLGS 3.0 subject to maximum additional ECLGS assistance to each borrower is limited to 40 % or Rs 200 crore, whichever is lower. Finance Ministry also extended the scope of ECLGS 3.0 to cover the Civil Aviation sector.
•      Under ECLGS 4.0, availing for a tenor of five years for ECLGS loan was made, that is, repayment of interest only for the first 24 months with repayment of principal and interest in 36 months thereafter.
•      100 % guarantee cover to loans up to Rs 2 crore to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants with the interest rate capped at 7.5 %.
•      Finance Minister announced on 28 June 2021 an additional ₹ 1.5 lakh crore for emergency credit line guarantee scheme (ECLGS), which will facilitate loans through microfinance institutions to 25 lakh persons. Overall cap of admissible guarantee raised from Rs 3 lakh crore to Rs 4.5 lakh crore.
•      Any queries/suggestions related to ECLGS can be raised to ceo@ncgtc.in
ECLGS has helped a lot to businesses. Even if MSMEs were able to reduce their cost by 5 % then also it is a huge relief. The scheme has certainly helped in the viability of the unit as the entire financials of a business became stronger. Moreover, they have also been able to attract labor back. A lot of this money was used for repayment of an existing debt by MSMEs as the interest rate charged under ECLGS by banks was capped at 9.25 % instead of the usual 14-15 % in a regular bank loan, in a situation they were not receiving their payments from buyers and were not able to pay their debts. But how much of that money went for growth capital and how much for servicing old debt is not known.
With now 100 % guarantee cover to loans up to Rs 2 crore to hospitals, nursing homes, clinics, medical colleges for setting up on-site oxygen generation plants with the interest rate capped at 7.5 %, is another cost-effective relief.
 
Rs 20,000 crores Subordinate Debt for Stressed MSM
Two lakh MSMEs were likely to benefit, including functioning MSMEs that are NPA or are stressed were made eligible under this scheme. The government announced providing support of Rs 4,000 Cr. to CGTMSE, which in turn provides partial Credit Guarantee support to Banks.
Promoters of the MSME will be given debt by banks, which will then be infused by the promoter as equity in the Unit.
 
Global tenders to be disallowed up to Rs 200 crores
Indian MSMEs and other companies have often faced unfair competition from foreign companies.
Therefore, the decision of the Indian Government to disallow Global tenders in Government procurement tenders up to Rs 200 crores is an appreciable decision.
This will be a step towards Self-Reliant India and support Make in India. This will also help MSMEs to increase their business.
 
MSME loan growth vis-à-vis Total Advances portfolio growth (prior COVID period)
The pace of growth for MSMEs loans by and large by the banks has been lower barring few exceptions, when compared with total advances growth, as evident from the historical data.

The fact is that out of 63 million MSMEs in the country (as per the latest data of the National Sample Survey available), 99 % in numbers are micro-enterprises. Also, not more than 10% of MSMEs are on the formal financing platform. This indicates a tremendous scope for financial intermediation by the formal sector including banks, financial institutions, and NBFCs.
 
The following two schemes, I would like to talk, needs to be given significant encouragement by the banks for MSMEs.
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
Availability of bank credit without the hassles of collaterals / third party guarantees is a major source of support to the first-generation entrepreneurs to realize their dream of setting up a unit of their own Micro and Small Enterprise (MSE).
 CGTMSE introduced a new “Hybrid Security” product allowing guarantee cover for the portion of credit facility not covered by collateral security. In the partial collateral security model, the Member Lending Institutions (MLIs) are permitted to obtain collateral security for a part of the credit facility, whereas the remaining part of the credit facility, up to a maximum of 200 lakh, can be covered under Credit Guarantee Scheme of CGTMSE. CGTMSE will, however, have a pari-passu charge on the primary security as well as on the collateral security provided by the borrower for the credit facility.
 The main objective of CGTMSE is that the lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed. The other objective is that the lender availing guarantee facility should endeavor to give composite credit to the borrowers so that the borrowers obtain both term loans and working capital facilities from a single agency.
 In the event of an MSE unit, which availed collateral-free credit facilities, fails to discharge its liabilities to the lender, the CGTMSE would make good the loss incurred by the lender at 75% of the credit exposure above Rs. 50 lakh and up to Rs. 200 lakh (85% for loans up to Rs. 5 lakh provided to micro-enterprises, 80% for MSEs owned/ operated by women, and all loans to North Eastern Region).
 
Credit Linked Capital Subsidy Scheme (CLCSS)
The benefit to MSEs under CLCSS is not going because of unawareness by and large with them. There is a much-needed requirement for disseminating awareness and the benefits of this scheme.
The objective of CLCSS is to facilitate technology to MSEs through institutional finance for induction well established and proven technologies in the specific sub-sectors/products approved under the scheme. There is an upfront subsidy of 15% on institutional credit up to Rs. 1.0 crore (i.e., a subsidy cap of Rs. 15.00 lakh) for identified sectors/ subsectors/ technologies.
All Scheduled Commercial Banks are acting as Primary Lending Institutions (PLI) through 11 Nodal Banks/Agency (SIDBI, NABARD, SBI, Andhra Bank, PNB, BoB, Canara Bank, Corporation Bank, Indian Bank, Bank of India & TIICL). The subsidy has also been made admissible for investment in acquisition/replacement of plant & machinery/equipment & technology up-gradation and the detailed operational guidelines are available on the official website of this office i.e., www.dcmsme.gov.in under icon TECH-UP.

Conclusion
MSMEs contribute substantially to our country’s manufacturing output, exports as well as GDP while creating employment for about 111 million people, which in terms of volume stands next to the agricultural sector. MSMEs are the backbone of our economy and thus need to be supported strongly, for an enhanced multiplier impact on our economy.