PM Modi announces MSME loan up to 1 crore in 59 minutes
On November 2, Prime Minister Narendra Modi announced a credit penalty of up to one crore for MSMEs. This has definitely been received as a progressive move towards the betterment of the MSME sector. The scheme also includes or obliges companies to use up to 25% of the total purchase instead of 20% with 3% reserved for women entrepreneurs, the interest rate charged is 8%. The loan can be applied on the online portal and would be approved within 59 minutes, after which the process takes up to 7-8 business days to disburse.
By providing GST details, income tax details, bank account details, an entrepreneur can avail the loan. GST registered businesses will also get a 2% refund on the interest paid on the loan. Based on eligibility, no specific information has been provided, however it would be limited to MSMEs. Rs 6,000 crore has been set aside for the improvement of technology that would facilitate and improve the manufacturing sector. However, the main criteria is to boost the growth of the manufacturing sector and increase GDP, as MSMEs play an important role in contributing to GDP by contributing up to 30%, there have been five aspects that it focuses on. “Access to credit, access to the market, technological updating, ease of doing business and a sense of security for employees.”
Regarding the immediate effect, which can be learned through user feedback. However, the feedback has not been very positive, as users have begun to complain about the delay in receiving OTPs or the capture or “penalty” of the loan. This is not talking about the disbursement that would leave the banks to decide to collect additional documentation processes, so the loan under the scheme is being approved or sanctioned but not disbursed. Since the banks have the authority to seek further documentation again, there could be a delay in disbursing the funds. However, the effect can only be learned through further use of this scheme, which the government could look to improve upon. The process is said to be easy to use, which would allow most MSMEs to get their hands on it.
As the disbursement has not yet been successful, news of misuse and leakage has not yet been released. However, since the government has not been specific about the failure to recover the loan, it is very likely that the banks will take a loss. The scheme is receiving criticism for being unclear or for vague information regarding disbursement, recovery or even loan eligibility. Furthermore, the fact that the applicant is expected to pay a convenience fee has also been cast under the negative shadow. Regardless of the criticism, the fee, which is a small amount of Rs 1,000, allows almost all MSMEs to bear the cost. As the scheme is still new, it would be difficult to judge its effectiveness yet, but at least it has opened the doors to expand their business and improve technology for MSMEs and women entrepreneurs.