Cabinet approves Rs 50,000 cr equity infusion scheme to support MSMEs
Jun 01, 2020
New Delhi [India], June 1 The Union Cabinet on Monday approved the modalities for implementing Rs 50,000 crore equity infusion to support Micro, Small and Medium Enterprises (MSMEs), which was announced last month as part of AtmaNirbhar Bharat Package last month to help the sector cope up with the situation created by COVID-19.
It also approved Rs 20,000 crore subordinate debt for stressed MSMEs and a new definition for MSME under which enterprises with investments up to Rs 20 crore and a turnover of less than Rs 250 crore will now be defined as 'medium' units.
Briefing the media about the decisions, Information and Broadcasting Minister Prakash Javadekar said that provisions have been made for equity infusion of Rs 50,000 crore to support MSMEs for the first time. It will be done through a Fund of Funds.
"This will help set-up a roadmap for MSMEs in debt-equity ratio management and capacity building," he said.
The minister said that MSMEs have also been given the opportunity to be enrolled in the stock exchange.
"Various key steps have been taken by the government to boost MSMEs, attract investment, and create jobs in the country. The cabinet has approved a provision to provide Rs 20,000 crore in subordinate debts to help distressed MSMEs," Javadekar said.
Subordinate debt is a debt owed to an unsecured creditor that in the event of liquidation can only be paid after the claims of secured creditors have been met. Javadekar said that this will help over two lakh stressed MSMEs across the country.
"Today was the first cabinet meeting of the second year of Prime Minister Narendra Modi-led government. Historic decisions, which will have positive impacts on the lives of farmers, MSMEs, street vendors were taken in the meeting," he said.
Javadekar said that the Central government has recognized the importance of MSMEs and the sector has been made an important part of the announcements made under the Aatmanirbhar Bharat.
He said that the government has further revised the definition of MSMEs, under which businesses that have investments up to Rs 1 crore and turnover of less than Rs 5 crore will be classified as 'micro' units.
Businesses will be defined as a 'small' unit if the investment is Rs 10 crore with a turnover of less than Rs 50 crore whereas enterprises with investments up to Rs 20 crore and a turnover of less than Rs 250 crore will now be defined as 'medium' units.
Finance Minister Nirmala Sitharaman had last month given details about the package for MSMEs after Rs 20 lakh comprehensive package was announced by Prime Minister Narendra Modi.
