MSME Measures of the Economic Package to fight for COVID-19 Crisis

Smt. Nirmala Sitharaman said our focus would be on land, labour, liquidity and law and also the measures focused on getting back to work i.e., enabling employees and employers, businesses, especially Micro Small and Medium Enterprises, to get back to production and workers back to gainful employment.

Efforts to strengthen Non-Banking Finance Institutions (NBFCs), Housing Finance Companies (HFCs), Micro Finance Sector and Power Sector were also unfolded. Other than this, the tax relief to business, relief from contractual commitments to contractors in public procurement and compliance relief to the real estate sector were also covered.

Following measures or the details of the MSME in the Economic Package announced were:-
  1. Rs 3 lakh crore Emergency Working Capital Facility for Businesses, including MSMEs

To provide relief to the business, additional working capital finance of 20% of the outstanding credit as on 29 February 2020, in the form of a Term Loan at a concessional rate of interest will be provided. This will be available to units with upto Rs 25 crore outstanding and turnover of up to Rs 100 crore whose accounts are standard. The units will not have to provide any guarantee or collateral of their own. The amount will be 100% guaranteed by the Government of India providing a total liquidity of Rs. 3.0 lakh crores to more than 45 lakh MSMEs.

  1. Rs 20,000 Crore Subordinate Debt for Stressed MSMEs

Provision made for Rs. 20,000 Cr subordinate debt for two lakh MSMEs which are NPA or are stressed. Government will support them with Rs. 4,000 Cr. to Credit Guarantee Trust for Micro and Small enterprises (CGTMSE). Banks are expected to provide the subordinate-debt to promoters of such MSMEs equal to 15% of his existing stake in the unit subject to a maximum of Rs 75 lakhs.

  1. Rs 50,000 Crores equity infusion through MSME Fund of Funds

Govt will set up a Fund of Funds with a corpus of Rs 10,000 crore that will provide equity funding support for MSMEs. The Fund of Funds shall be operated through a Mother and a few Daughter funds. It is expected that with leverage of 1:4 at the level of daughter funds, the Fund of Funds will be able to mobilise equity of about Rs 50,000 crores.

  1. New definition of MSME

Definition of MSME will be revised by raising the Investment limit. An additional criteria of turnover also being introduced. The distinction between the manufacturing and service sector will also be eliminated.

  1. Other Measures for MSME

E-market linkage for MSMEs will be promoted to act as a replacement for trade fairs and exhibitions. MSME receivables from Government and CPSEs will be released in 45 days


If you are a part of an MSME sector, this blog will definitely give you an insight into the new revised measures that our Government has introduced. The government has come up with a newly revised definition for MSMEs with an increase in the investment limit.

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