The Government of India, for (MSMEs) Ministry of Micro, Small and Medium Enterprises had announced the scheme for Scheduled Commercial Banks which was ‘Interest Subvention Scheme for MSMEs 2018’ was launched on 2 Nov, 2018. Now, the Government has decided to include Co-operative Banks as the Eligible Lending Institutions which became effective from 3rd March 2020.
Key Highlights of Interest Subvention Scheme
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Why RBI has included Cooperative Banks in Interest Subvention Scheme?
This move will prove to be effective as it gives relief to registered MSME because of COVID-19. As per scheme this provides an interest relief of the 2% p.a. to eligible MSMEs on their outstanding incremental term loan or fresh term loan or working capital during the period of its validity. The Scheme coverage is limited to all term loans and working capital to an extent of Rs 100 Lakh. In Nov 2018 an interest subvention scheme was first announced for scheduled commercial banks. This was under effect till the end of Financial Year 2020, overall for two financial years FY 2018-19 and FY 2019-20.
It has allowed participation of co-operative banking sector in a MSME business sector with greater vigour and zest, on the development underlining that the parity of co-operative banks with commercial banks is the welcome step. However, keeping in view the COVID-19 pandemic[1] that proven to be worst for the financial year, a government has decided to extend the scheme to loans given to MSMEs by co-operative banks too, has now became eligible lending institutions that becomes effective from March 3, 2020.
Validity of Scheme has Extended
The validity of the Interest Subvention scheme has been extended till March 31, 2021. Therefore, incremental term loan or fresh term loan or working capital limit extended by co-operative banks with effect from March 3, 2020. They will be now become eligible for coverage under a scheme. The RBI has also clarified that acceptance of claims in multiple lots for a given 6 months by eligible institutions is permitted. The loan accounts on a date of filing claim must not be declared as NPA as per the extant guidelines. No interest subvention must be admissible for any period during which the account remains NPA.
Implementation of Scheme
Small Industries Development Bank of India (SIDBI) is a single national level nodal implementation agency for such scheme. Nodal offices of eligible lending institutions have to submit the half yearly claims to SIDBI in an enclosed format in accordance with the guidelines for claim submission provided in a scheme.
Conclusion
The (RBI) Reserve Bank of India has allowed co-operative banks including the urban cooperative banks to avail Interest Subvention Scheme for (MSMEs) Micro, Small and Medium enterprises that were restricted to Commercial banks earlier. The Co-operative Banks can take appropriate action as envisaged in the guidelines and can issue necessary instructions to their branches and controlling offices for successful implementation of the scheme.
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