The Union Cabinet has announced the approval of provisioning of Rs 20,000 crore as subordinate debt to provide equity support to stressed MSMEs. Meghna Suryakumar, founder & CEO, Crediwatch, underscores how small businesses are set to benefit:

New definition for MSMEs: As per the new regulation, the new categorisation of investment of Rs 1 crore and turnover of Rs 5 crore is being classified as micro-units. The units with an investment of Rs 10 crore and turnover of Rs 50 crore will be classified as small units and those with an investment of Rs 50 crore and turnover of Rs 250 crore will be classified as medium units. The new definition will promote these enterprises to further grow in size and scale. The government’s infusion of Rs 50,000 crore equity scheme for MSMEs that has an excellent export track record will help them in getting listed. This move will further push India’s step onto becoming self-reliant.

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Collateral-free Automatic Loans: While this extends the previous loan moratorium benefits, the new terms should benefit as many as 45 lakh businesses and help with working capital requirements in coming days. We believe, setting the threshold for eligibility (Rs 25 crore outstanding and Rs 100 crore turnovers) is helpful. This would help the small businesses meet some immediate working capital needs such as salaries, rents, etc and would help kickstart the business after the lockdown.  The distressed asset fund of Rs 4,000 crore, will aid 2, 00,000 distressed MSMEs with loan of up to Rs 75 lakhs.

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