Prime Minister Narendra Modi announced on Saturday, 31st Dec, that the government will be taking steps towards empowering SMEs by increasing the cash credit limits and doubling the credit guarantee on loans. These steps will also lead to lower borrowing costs for the SMEs. According to Indian Express’ recent talk with Bhuwan Goyal, director at A. P. Refinery which is an oil refining company based in Punjab and is a part of the SME sector; this recent announcement will ensure that the additional deposits as a result of demonetization doesn’t only help the large scale enterprises. Instead, SMEs will be able to gain easier access to credit because of the doubling of guarantee.
Earlier, the credit guarantee was 1 crore, after doubling it, the Credit Guarantee Fund Trust For Micro and Small Enterprises will be able to provide credit guarantee for up to 2 crore. In addition to this, the scheme will also cover loans from NBFCs. By ensuring that the SMEs do not end up paying a huge amount of interest on the loans, the government is helping them increase their ability to use their funds for profitable purposes. The scheme enables existing as well as new SMEs to get collateral-free loans at a lower interest rate.
With the country still grappling with the effects of demonetisation, this announcement brings cheer in the SME sector with the hope of improving business prospects and achieving business outcomes more effectively with the ability to get loans for their business at lower rates.