The Federation of Indian Chambers of Commerce & Industry (FICCI) and KAS with support of the Goa Chamber of Commerce & Industries organised a virtual session on 28 July 2020, on Atmanirbhar Goa: Empowering MSMEs for self-reliance to assess awareness level of MSMEs about various government schemes and their effectiveness. 

 

MSMEs are amongst the strongest drivers of economic development, but due to COVID-19 pandemic, this sector has been hit the hardest. However, MSMEs can play a major role in achieving the goal of Atmanirbhar Bharat (Self-Reliant India) if adequate support and guidance is given on finance, technology and enhancing competitiveness.   

 

FICCI organised a virtual session for creating more awareness about financing schemes and platforms such as SDBI, TReDS and GeM.

 

The session saw participation of speakers such as Dilip Chenoy, Secretary General, FICCI; Manoj M Caculo, President, GCCI; Abheek Datta, Regional Head, BD RXIL; Nikhil Patil, Regional In-charge GeM and  Pranava Piyush, SGM SIDBI. 

 

The definition of MSME has been revised by the government by raising investment limit. The distinction between the manufacturing and service sector has also been eliminated. An amount to the tune of Rs three lakh crore collateral free automatic loans for business including MSMEs has been announced by the government. 

 

Emergency Credit Line would be provided to business from banks and NBFCs up to 20 percent of the entire outstanding credit as on 29 February 2020. The government has also capped the interest rate and 100 percent credit guarantee cover by banks and NBFCs on principal and interest. This scheme can be availed till 31 October 2020. 

 

The government has even announced automatic loans under the Emergency Credit Line Guarantee Scheme (ECLGS). The purpose of the scheme is to provide 100 percent guarantee by NCGTC for Guaranteed Emergency Credit Line (GECL), a pre-approved WTC sanction limit up to 20 percent of loan outstanding as on 29 February 2020 to eligible MSMEs. 

 

Apart from this, the government provided a provision of Rs 20,000 crore as subordinate debts to help stressed MSMEs who need equity support. The government has offered a support of Rs 4,000 crore to CGTMSE. The Centre has launched Rs 30,000 crore Special Liquidity Facility and under this scheme investment is made in both primary as well as secondary market grade debt paper of NBFCs/ HFCs/ MFIs. 

 

Small Industrial Development Bank of India (SIDBI)

 

Following these major announcements made by the Centre, SIDBI has responded accordingly. SIDBI has launched the scheme Timely Working Capital Assistance to Revitalise Industries in Times of Corona Crisis (TWARIT) under ECLGS. Under this scheme 1,256 sanctions have been done amounting to Rs 415 crore. 

 

The purpose of the scheme is to provide relief to the existing MSME customers of SIDBI whose operations are impacted due to COVID. There will be no promoters’ contribution, no additional collateral, and the interest rate is 8.25 percent will annual reset. The scheme is valid till 31 October 2020 or till the amount of Rs three lakh crore is sanctioned under ECLGS, whichever is earlier. The tenure is four years with one year moratorium.  

 

Another scheme announced by SIDBI is LIQUID - Liquid Support by Urgent Infusion of Funds through Direct Finance Window. The liquidity support is in the form of WCTL to the existing customers of SIDBI. The interest rate under this scheme is 5.90 percent of loans repayable up to 15 April 2021 and 8.31 to 9.56 percent for others with no collateral. The repayment period is three years. 

 

SPEED and SPEED PLUS are two more schemes offered by SIDBI for purchase of equipment for enterprise’s development. SPEED scheme is for customers who buy standard OEM machines and SPEED PLUS is for customers who buy high-end OEM machines. PRATHAM Scheme provides priority assistance to MSMEs based on hybrid or alternate security model. The scheme is for customers who want to buy any kind of machines. 

 

Another offering by SIDBI is Term-loan Assistance for Rooftop Solar Plants (STAR). Under this scheme, assistance is provided to MSMEs customers both new and existing who are willing to acquire Solar PV Rooftop plants on its premises of 25 kW to 50 kW capacities. The loan tenure provided is up to seven years. 

 

Receivables Exchange of India (RXIL)

 

An expert from RXIL, an NSE-SIDBI JV, also gave an overview of how MSMEs can utilise the schemes offered by the government. RXIL was launched under the RBI Trade Receivable Discounting Systems (TReDs) to enable formalisation of MSMEs by providing access to credit. 

 

RXIL enables buyers to accept invoices uploaded by seller; enables financers to buy invoices from sellers and also settles payment from buyer to financier; settles repayment from buyer to financier. RXIL also offers Buyer-Seller link wherein relationship is established between the buyer and seller on TReDS platform. 

 

RXIL offers an instrument ‘Factoring’, a solution wherein the seller initiates the transaction. In factoring, the seller uploads the invoice onto the RXIL platform and creates factoring unit. The buyer approves this, and the necessary details of the invoice are sent to the financers for bidding. The seller selects suitable bids within 48 hours of acceptance and the financer pays the seller. On the date, the buyer pays the outstanding amount to the financer. Factoring can be utilised by the seller to discount invoices of multiple buyers. 

 

The benefits for MSMEs seller is that they receive funds against approved invoices within 48 hours without administration costs; MSMEs are not to a single bank and they have option to choose bids among multiple financers; the buyers’ account is automatically debited through a pre-approved NACH mandate.  

 

To boost growth and revival in the MSMEs sector, the government has made it mandatory for companies with a turnover of Rs 5,000 crore and above to join TReDS. Also, to widen the scope of financers, during Union Budget 2020-21, it was announced that all NBFCs can also finance on the TReDs platforms. 

 

Government e Marketplace (GeM)

 

GeM is a one-stop portal for all government buyers including Central and state ministers, departments and PSUs. It provides the tools of eBidding, Reverse Auction and Procurement to facilitate government users. 

 

It provides benefit for sellers such as one-stop for bids/reverse auction on products/services; dynamic pricing i.e. price can be changed based on market condition, vendor rating system; new product suggestion facility available to sellers; monitoring of supplies and payment; New on Gem showcases list of new product category added. 

 

The benefits extended to MSMEs include tender sets free of cost, exempt from Earnest Money (EMD), purchase preferences of minimum 25 percent to MSEs with lowest (L1) bidder. Moreover, 358 items are exclusively reserved for MSEs.

 

The buyers have also been provided with the option to exempt the MSEs from turnover and past experience criteria at the time of creation of bids as provided for PPP-MSE order. Further, suitable ATC clauses are already enabled for ensuring compliance of PPP-MSE orders. Primary sellers have option to create secondary sellers to assign roles like bid participation, creation of catalog, order fulfillment. 

 

Moreover, there will be new and upcoming features on the platform. These include downloadable PDF format, search by Product ID, contract cancellation, GeM Pool Account, among others. 

 

GeM 4.0 portal will also be launched soon which will have technology roadmap involving Analytics, Hyper Ledger with smart contracts using block chain technology, Artificial Intelligence, Machine Learning and Deep Learning. It offers NLP-based search engine, dedicated corner for CPSEs and large buyers.