MSME Minister Narayan Rane Launched a special scheme for Micro Enterprises (IMEs)

20.02.24 05:44 AM - Comment(s) - By RB Associates and Tax Matters

MSME Minister Narayan Rane Launched a special scheme.

MSME Minister Narayan Rane launched a special scheme for informal micro enterprises (IMEs), exempted from the Goods and Services Tax (GST) regime. This scheme enables IMEs to access collateral-free loans up to Rs. 20 Lakhs under the government's credit Guarantee Fund trust for Micro and Small Enterprises (CGTMSE)


In this Blog post, we will explain the features and benefits of this scheme, and how it can help IMEs grow their businesses and contribute to the economy.

What are IMEs and why do they need support ?

IMEs are small businesses that operate in the informal sector, without any formal registration or tax compliance. they are typically engaged in activities such as retail, trade, services, manufacturing, etc. IMEs are estimated to account for about 90% of the total MSME sector in India and provide employment to millions of people.


However. IMEs face many challenges in accessing formal credit from banks and financial institutions. They often lack proper documentation, business records, credit history, collateral, etc. As result, they have to reply on informal sources of credit, such as money lenders, relatives, friends, etc., which charge high interest rate and impose harsh conditions.

To address this problem, the government has launched a special scheme for IMEs under the CGTMSE.



What is CGTMSE and how does it work ?


CGTMSE is a trust step by the government and the Small Industries Development Bank of India (SIDBI) to provide credit guarantee to bank and financial institutions for lending to MSMEs without collateral. Under this scheme, the trust covers up to 75% loan amount in case of default by the borrower.

The scheme covers loans up to Rs. 2 Crore for MSMEs engaged in manufacturing or services activities. The interest rate is linked to the base rate of lending bank or financial institution, plus a margin not exceeding 4%. The repayment period is up to 7 Years.

The scheme also provides a one time guarantee fee of 1.5% of the loan amount, and an annual service fee of 0.75% of the outstanding loan amount.  


How does the special scheme for IMEs differ from the regular CGTMSE scheme ?


The special scheme for IMEs is a sub-scheme under the CGTMSE, with some additional features and benefits. These are 

    - The loan Limit is increased from Rs. 2 Crore to Rs. 20 laksh for IMEs.
    - The guarantee cover is increased from 75% to 85% of the loan amount for IMEs.
    - The guarantee fee and service fee are waived off for IMEs
    - The eligibility criteria are relaxed for IMEs. they do not need to have any formal registration or GST number. The only need to 
       have a valid    Aadhaar number and a bank account.
    - The documentation requirements are simplified for IMEs. They only need to submit a self-declaration from stating their
       business activity, turnover, income, etc.
    - The loan processing time is reduced for IMEs. they can get the loan sanctioned within 7 days of applying online through a                 portal  or app.


What are the benefits of the special scheme for IMEs?


The special scheme for IMEs aim to provide easy and affordable access to formal credit for informal micro enterprises. Some of the benefits are: 

     - It can help IMEs expand their business operations, increase their productively, quality, and competitiveness.
     - It can help IMEs create more employment opportunities, especially for women and youth.
     - It can help IMEs formalize their business over time, by registering under GST and other relevant laws.
     - It can help IMEs contribute to the growth and development of the MSME sector and the economy as a whole.


How can IMEs apply for the special scheme?


IMEs can apply for the special scheme through a dedicated portal or app launched by the government. They can also visit their nearest bank branch or financial institution that is empaneled under the CGTMSE. 

The application process is simple and hassle-free. IMEs need to fill up on online from the basic details such as name, address, aadhaar number, business activity, turnover, income, etc. They also need to upload a self-declaration from and a photograph.

The portal or app will verify the details and generate a sanction letter within 7 days. The borrower can then visit the bank branch or financial institution with sanction letter and get the loan disbursed.

The portal or app will also provide other features such as tracking the loan status, repayment schedule, grievance redressal, etc.

Conclusion


The special scheme for IMEs is a landmark initiative by the government to support the informal micro enterprises in India. it will provide them with easy access to collateral-free loans up to Rs. 20 Lakhs under the CGTMSE. It will also help the grow their businesses and become part of the formal economy.

If you are an IME or know someone who is, you should take advantage of this scheme and apply for it today. You can visit the portal or app or contact your nearest branch for financial institution for more details

RB Associates and Tax Matters

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