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Credit facility for MSME by Government of India to fight Covid-19

Puja Sharma
May 6th, 2020 · 1 min read

Government of India through SIDBI (Small Industries Development Bank of India) has launched a scheme to finance those MSMEs who are manufacturing any products or providing any services related to fighting corona virus, such as:

  • Hand Sanitizers
  • Masks
  • Gloves
  • Head Gear
  • Body Suits
  • Overalls
  • Shoe Covers
  • Protective Googles
  • Ventilators
  • Testing Labs
  • Clinics etc.

This facility will not only help MSMEs in acquiring equipment, plant and machinery or other assets but will also give some comfort in purchase of material required for production / service. By this facility, MSMEs can also meet additional emergencies to ramp up supplies of above-mentioned products.

This scheme will be called SAFE (SIDBI Assistance to Facilitate Emergency response against corona virus). Under this scheme, loan will be given within 48 hours with interest rate as low as 5% (on reducing balance basis). In addition to it, government has gone beyond the established criteria in banking circles has is providing up to 100% finance (with asset coverage of 1.1. for existing customer and 1.2 for new customers). Government of India has extended the coverage of this scheme by including both existing as well as new customers of SIDBI.

With maximum loan amount of Rs.50lakhs, this facility can be availed in any of the form: Term Loan (TL) or Working Capital Term Loan (WCTL). If any customer wants to avail Term Loan facility, then he / she will have repayment period up to 5 years with 1-year moratorium. In Working Capital Term Loan facility, repayment period up to 18 months will be available with suitable moratorium. In order to fulfill the immediate requirement by healthcare sector, government has brought this scheme with some validity clause i.e. drawls under this scheme shall be valid till September 30, 2020.

In order to speed up loan decisioning process by SIDBI, government has waived off processing fee and prepayment charges. Along with this, cost of credit guarantee will be borne by SIDBI. Also, there is standard checklist for availing the credit facility:

New to SIDBI Customers

  • Two years of cash profits
  • Account not in SMA1/2/NPA category
  • Extension of existing securities /any other security to meet asset coverage

Existing Customers

  • Cash profit in last year’s balance sheet
  • Account not in SMA1/2/NPA category
  • Credit guarantee cover is offered at no cost to customer, or any security offered by borrower to meet asset coverage norms

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