MSME exporters get Rs 7,300 crore credit line – The Times of India

NEW DELHI: The commerce department on Friday unveiled a new interest subvention mechanism aimed at MSMEs, along with a corpus to guarantee loans to small businesses that export. The interest subvention scheme, which has an allocation of nearly Rs 5,181 crore spread over six years from the current fiscal, will offer a subsidy of 2.75% on loans with a scheduled reset every six months. The size of the subsidy will be linked to the repo rate and to interest rates in other competitive economies, a senior official told reporters, adding that the move is aimed at addressing a critical handicap faced by small businesses.

What is offered

In addition, an incentive will be offered to exporters selling goods in new and emerging markets, with details of the scheme to be announced in the coming weeks, along with initiatives to develop other financial instruments such as factoring. For years, Indian companies have complained about lack of access to credit and higher interest rates as major barriers. Officials said small businesses are currently borrowing 9-12% to meet their export credit needs and the subsidy will provide some relief. Wiser from past experience, the Directorate General of Foreign Trade has this time capped annual interest subvention support at Rs 50 lakh per company, with 75% of product lines, especially the labor-intensive ones, eligible. The second collateral support scheme has a corpus of Rs 2,114 crore, again spread over six years, with the government hoping to deploy this 30-35 times to help facilitate the flow of loans of Rs 60,000-65,000 crore. “Delinquencies are at 3 to 4% and appear to have peaked, so the money can be used to provide more loans,” an official said. For micro and small businesses, guarantee coverage of up to 85% will be provided, while for medium-sized enterprises it will be limited to 65%. “The launch of interest rate support for pre- and post-shipment export credits and the collateral guarantee mechanism marks a decisive step towards addressing two of the biggest challenges faced by SME exporters: high credit costs and lack of collateral,” said Fieo President SC Ralhan.