The Central Government is running a special scheme to rescue micro and small businessmen from cash crunch. Under this, Micro Enterprises are being given customized credit cards with a limit of up to ₹ 5 lakh. The main objective of this scheme is to provide working capital to small traders easily for daily operations and to promote digital transactions.
Finance Minister Nirmala Sitharaman had announced this Micro Credit Card (ME-Card) for micro enterprises in the Union Budget. In the initial phase of the scheme, a target has been set to issue 10 lakh such credit cards during the first year.
Who will get this benefit and what are the conditions?
To avail this credit card facility, it is mandatory for the business unit to be registered on the 'Udyam Portal' of the MSME Ministry. However, the authority to issue a credit card and fix its final limit will depend on the policies of the concerned bank and scrutiny of the credit profile of the applicant.
The government has kept the terms and conditions of this card quite affordable. No joining fee will be charged from initial applicants. Additionally, the annual fee has been capped at a maximum of 1 per cent of the sanctioned credit limit or ₹1,000 (whichever is lower). UPI and Account Aggregator Framework are being used to make the loan approval process faster and paperless. According to the guidelines of the Reserve Bank of India, its interest rates have been kept very competitive.
How is revolving credit different from a normal loan?
This facility is quite different from a traditional term loan. It works as a revolving credit limit. Businessmen can withdraw money from the sanctioned amount as per their need and use it to purchase raw materials, maintain stock or meet daily expenses. The credit limit becomes available again upon payment of the withdrawn amount.
Big change in the definition of MSME
To provide relief to small industries, the government has also amended the classification limits of MSMEs. Now the investment limit for micro enterprises has been increased from ₹ 1 crore to ₹ 2.5 crore and the turnover limit has been increased from ₹ 5 crore to ₹ 10 crore.
Similarly, the investment and turnover limits for small enterprises have been fixed at ₹25 crore and ₹100 crore respectively. At the same time, for medium enterprises the investment limit has been increased to ₹ 125 crore and the turnover limit has been increased to ₹ 500 crore. This change will give lakhs of additional units the opportunity to avail the benefits of government schemes.