MSME Loans Update: Interest Subvention Scheme on MSMEs Loans Extended Till End of March 31, 2021

Mumbai, October 8: The Reserve Bank of India (RBI) announced that the two percent interest subvention scheme for micro, small and medium enterprises (MSMEs) on loans extended by co-operative banks has now been extended till March 31, 2021. Moreover, the terms of the scheme have also been tweaked. In November 2018, the government had announced the ''Interest Subvention Scheme for MSMEs 2018'' for scheduled commercial banks for two financial years 2018-19 and 2019-20. With the new development in place, the scheme has now been extended for the financial year 2020-21.

According to reports, co-operative banks also became as eligible lending institutions effective from March 3, 2020 and the coverage of the scheme is limited to all term loans and working capital to the extent of Rs 100 lakh. The scheme provides for an interest relief of two per cent per annum to eligible MSMEs.

The RBI, in a notification, said certain operational guidelines for the scheme have been further modified by the government. The validity of the scheme has been extended till March 31, 2021. "Accordingly, fresh or incremental term loan / working capital limit extended by co-operative banks with effect from March 3, 2020 will be eligible for coverage under the scheme," RBI said.

A report by PTI said that the requirement of Udyog Aadhaar Number (UAN) may be dispensed with for units eligible for GST. Units not required to obtain GST may either submit Income Tax Permanent Account Number (PAN) or their loan account must be categorised as MSME by the concerned bank, the RBI said. Moreover, RBI has asked co-operative banks to take appropriate action as envisaged in the operational guidelines and issue necessary instructions to their branches or controlling offices for successful implementation of the scheme.

Reports inform that according to the scheme, the loan accounts on the date of filing claim should not have been declared as non-performing assets (NPAs). No interest subvention would be admissible for any period during which the account remains NPA.