Everything One Needs To Know About MSME Loans

MSME Loans: All You Need To Know Read the Complete Guide

What is MSME?

MSME marked its pillars in October 1999. Further, in September 2001, it got into 2 different divisions, namely, the Ministry of Small Scale Industry and the Ministry of Agro and Rural Industry. Further on, because of changes in the Government of India’s rules, 1961 on 9th of May, 2007 it was consolidated into Micro, Small and Medium Enterprises.

Objective of MSME loans:

The goal for which MSME was born was to develop small and medium sized businesses along with Khadi, Village and Coir to establish new businesses and generate more bread and butter for people dedicating their time and efforts by working for them. For being a supporting pillar and helping the MSMEs intensify their presence Ministry now sets policy for its governance and facilitates programs, projects, schemes and further to help them more, they even supervise their execution. 

A brief about MSME loans:

brief about MSME loans

So as soon as the MSME was developed we need someone to govern it, right? So, the governance for it was handed over to the Ministry of Micro, Small and Medium enterprises and since then it generates good employment and revenue for our economy.

 The Government of India provides loans to Micro, Small and Medium Enterprises to boost their growth up. India is the core of MSME and through it us getting benefits so we can see that this segment caters a large number of Audience. Getting the MSME loans offers strength and potential to business which has the plan to expand their networks and wish to serve the best through their products or services.

What role does RBI play for the upliftment of MSMEs?

RBI has made significant efforts to support MSME growth and has planned and mapped every step that will make it simple and beneficial for MSME and the general public to access services and benefit from them. The Government of India and RBI both work as a backbone for this by providing various programs, schemes, helps, etc. to the MSME.

Classification of MSME:

Manufacturing companies that produce or manufacture products for any industry, or that employee equipment and plant to add value to a finished good that has a unique name, personality, or use; and Service Businesses that perform or provide services;

MSMEs are now characterized on the basis of Composite Criteria of “Investment in Plant & Machinery / equipment and Annual Turnover” as per the updated Classification effective July 1, 2020.

What are the eligibility criteria for MSME loans?

What are the eligibility criteria for MSME loans

Various banks NBFCs, Private-Run Banks, State-Run Banks readily provide loans to MSMEs, Moreover NBFCs and State-run banks provide loans much quicker to MSMEs.

  • Any business entity, be it a small start-up, female entrepreneur, self-employed professional, proprietorship and partnership firm can avail an MSME Loan.
  • The task here is to determine what should be the amount of loan; so, it depends from person to person, business to business but the loan amount ranges from Rs.1 lakh to Rs. 50 crores.
  • There are some banks that, without any security, provide tiny collateral of Rs.10-20 lakhs up to huge amounts of Rs.40-50 lakhs, so the collateral amount range changes.
  • There is plenty of documentation required for unsecured MSME loans.
  • Certain MSME loans are being provided for various big or small reasons for the entity.

RBI and its characteristics:

The following are the framework’s key characteristics:

  • Banks or creditors should create three sub-categories under the Special Mention Account (SMA) category as per the Framework to identify account stress before an MSME loan account becomes a Non-Performing Asset (NPA).
  • Every MSME borrower has the option to voluntarily start a legal action under this Framework.
  • A committee-based method for choosing the corrective action plan will be used.
  • Deadlines have been set for making several decisions following the Frame-work.

So here as we all can see how important, integral and major role a Micro, Small and Medium Enterprise plays in developing our country, providing bread and butter to the economy and majorly helping the rural part of the country with employment and help. The government of India is working very well for better functioning, growth and ease of this sector. We, at Egniol, provide the best and most well-followed consultation and assistance throughout the process of MSME loans, your experience will be hassle-free and you will not have to double-check your work with us.

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