NEW DELHI: In a move that will provide relief to pandemic-hit micro, small, and medium enterprises (MSME), the Reserve Bank of India (RBI) has extended the two per cent MSME interest subvention scheme provided on loans extended by co-operative banks for the current fiscal year.
Set out in a notification dated October 7, the central bank has also tweaked certain operational guidelines for the scheme. “Accordingly, fresh or incremental term loans/working capital limit extended by co-operative banks with effect from March 3, 2020 will be eligible for coverage under the scheme,” RBI said.
The interest subvention scheme was first announced in November 2018 for scheduled commercial banks and was to be under effect until the end of FY2020, spanning two financial years FY2018-19 and FY2019-20. However, keeping in view the Covid-19 pandemic which broke out in the last leg of the financial year, the government decided to extend the scheme to loans given to MSMEs by co-operative banks too, who became eligible lending institutions effective from March 3, 2020.
The government has now extended the scheme for loans issued during the current financial year too.
According to the RBI notification, the coverage of the scheme is limited to all term loans and working capital to the extent of Rs 100 lakh. The scheme provides for an interest relief of two per cent per year to all the eligible MSMEs. As per the conditions of the subvention scheme, loan accounts on the date of filing the claim should not have been declared as a non-performing asset (NPAs).
No interest subvention would be admissible for any period during which the account remains NPA, the RBI pointed out. The central bank has also asked co-operative banks to take appropriate action as envisaged in the operational guidelines and issue necessary instructions to their branches or controlling offices for successful implementation of the scheme.