Collateral-Free Automatic Loans for MSMEs

Atmanirbhar Bharat Abhiyan

As a part of Atma Nirbhar Bharat Abhiyan, a relief package announced by the government, a significant portion has been allocated towards revival of MSMEs. Out of the entire funds allocated for MSMEs, around 50% of the funds will be used for this collateral free loan. Around 45 Lakh MSMEs are likely to get benefit from this scheme.

Let’s understand this scheme in detail –

MeaningUsually banks take an asset as a collateral security to eliminate the risk as the bank will have an asset to fall upon in case of a default. In case of collateral free loan, the borrower is not required pledge any asset. So, even though the borrower is not able to provide any collateral, he will be eligible for the loan.
EligibilityAll the MSMEs having an outstanding loan of up to Rs. 25 Crore as on 29/02/2020 and an annual turnover of up to Rs. 100 Crore.
Outstanding LoanAll MSME borrower accounts with outstanding credit of up to Rs 25 Crore as on February 29 which were less than or equal to 60 days past due as on that date, i.e., the accounts which are standard are eligible for this facility.
AmountBorrower is eligible for an additional loan of up to 20% of the loan amount outstanding as on 29/02/2020.
FinancerBorrower’s existing bank or NBFC will finance this loan. In case of multiple bankers, the borrower can take the loan from one of those banks or NBFC’s.
Guarantee100% credit guarantee will be provided to Bank, financial institutions and NBFC on Principal as well as Interest.
Loan TenureThese Loans will have tenure of 4 years with 12 Months moratorium on principal repayments. Borrowers are only required to pay the interest portion on the loan for first 12 months.
Interest RateInterest under this scheme will be capped at 9.25% for banks & financial institutions and 14.00% for NBFC’s.
Guarantee FeeBorrowers are not required to pay any amount in the form of guarantee fee to the bank, financial institutions or NBFC’s.
ValidityThis scheme is valid from the date of announcement of the scheme to 31/10/2020 or till an amount of Rs. 3 Lakh Crore is sanctioned under the scheme, whichever is earlier.

We hope this Information is helpful to you. Do let us know if you have any queries.

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