The Reserve Bank of India (RBI) has advised banks to link loans extended to micro, small and medium enterprises (MSMEs) to an external benchmark, with the objective of improving the transmission of monetary policy, the government informed Parliament.
In a written reply in the Lok Sabha, Minister of State for Micro, Small and Medium Enterprises Shobha Karandlaje stated that under the external benchmark-based lending framework, the interest rate reset period for MSME loans has been reduced to three months. To extend the benefits of this framework to existing borrowers, banks have also been advised to offer a switchover option on mutually agreed terms.
Quality Control Orders and MSME Relaxations
The government further highlighted measures related to the implementation of Quality Control Orders (QCOs) to ensure uninterrupted domestic production by MSMEs. The Bureau of Indian Standards (BIS), under the Department of Consumer Affairs, is implementing QCOs in a phased manner as issued by concerned line ministries, with specific exemptions and relaxations for MSMEs.
Key relaxations include additional compliance time for micro and small enterprises, with a six-month extension granted to micro enterprises and a three-month extension to small enterprises. Exemptions have also been provided for imports by domestic manufacturers producing export-oriented goods, as well as for imports of up to 200 units for research and development purposes.
The framework also allows clearance of legacy stock manufactured or imported prior to the implementation of QCOs within six months from the effective date.
BIS Incentives for MSMEs
To support compliance, BIS provides financial incentives to MSMEs in the form of reduced annual minimum marking fees. Concessions include an 80 percent reduction for micro enterprises, 50 percent for small enterprises, and 20 percent for medium enterprises. An additional concession of 10 percent is available to MSMEs located in the northeastern region or those operated by women entrepreneurs.
The requirement for maintaining an in-house laboratory has also been made optional for MSME units.
Credit Support Measures
The government has also introduced the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME), which provides credit guarantees to facilitate access to loans, particularly for the purchase of equipment and machinery.
In addition, scheduled commercial banks have been directed not to insist on collateral security for loans of up to ₹10 lakh extended to micro and small enterprise units.
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