Loan Scheme for MSMEs During COVID-19



In light of current economic issues due to the COVID-19 pandemic, many industries are facing a downfall. However, the government has introduced certain schemes to help keep these industries stable to facilitate the recovery phase. This article focuses on MSMEs and newly introduced loan schemes for them.

What are MSMEs?



MSMEs is an acronym for Micro, Small and Medium Enterprises. The Micro, Small and Medium Enterprises Development Act, 2006, further divides them into two divisions, namely, Manufacturing and Service enterprises. Manufacturing enterprises deal with the manufacturing and/or production of goods. On the other hand, the service enterprises, as the name suggests, provides or renders certain services.

Eligibility for the Loan Scheme?



All shopkeepers, fruit and vegetable vendors, artisans, repair shops, truck operators, food processors, micro/small/medium-sized manufacturing and service units, etc. are eligible for the MSME loan scheme. It is important for these industries to have a stable credit flow in all conditions to improve the overall economic situation of the country.

Loan Schemes?



Financial institutions like banks and NBFCs grant certain loans to the MSMEs. Apart from that, there are some government schemes that also serve the same purpose. These loans/schemes help the emerging as well as the established businesses to get financial support and necessary funds in order to sustain in the highly volatile industrial environment. In this article, we will be discussing some prominent government schemes and loans offered to these Micro, Small and Medium Enterprises.

1. MUDRA Loan



The Micro Unit Development and Refinance Agency or MUDRA provide financial support to small business owners in the form of loans. The three categories of MUDRA Yojana is as follows —

  • Shishu: In this category, a loan of an amount up to ₹ 50,000 is provided to an MSME start-up.
  • Kishore: A loan of an amount up to ₹ 5,00,000 is provided to emerging MSME in this group.
  • Tarun: In this category, a loan of an amount up to ₹ 10,00,000 is provided to established MSMEs looking for expansion.
  • The maximum repayment tenure is of 60 months for all Mudra loan categories.

    2. CGTMSE (Credit Guarantee Funds Trust for Micro and Small Enterprises)



    Introduced for establishing a strong credit relief system and to facilitate the MSME (Micro, Small and Medium Enterprises) with a better and more reliable credit flow, CGTMSE (Credit Guarantee Funds Trust for Micro and Small Enterprises) is one of the foremost government schemes for this sector. There is no external collateral or third party guarantee that comes along with/under this scheme.

    This MSME loan is sanctioned and backed by the MLI (Member Lending Institution) and provides a guarantee cover for a large portion of the total loan amount. Under CGTMSE, emerging as well as established MSMEs are eligible for a maximum credit capital of up to ₹ 2 crores.

    The CGTMSE also offers support in terms of rehabilitation assistance to any Micro, Small and Medium Enterprise unit that is not in good condition due to the factors beyond the control of management. The maximum credit capital up to ₹ 1 crore is offered to the dilapidated MSME units.

    3. PMEGP (Prime Minister’s Employment Generation Programme)



    The PMEGP is integrated with 2 more government schemes, namely, Rural Employment Generation Programme (REGP) and Prime Minister’s Rojgar Yojana (PMRY). It is a credit-based subsidy program introduced for the generation of employment. Under this scheme, the government grants a subsidy of 15-35% in addition to beneficiaries’ investment of 5-10% of the project cost. The business owners are offered remaining funds by the participating banks in the form of term loans.

    4. SIDBI (Small Industries Development Bank of India)



    SIDBI stands for the Small Industries Development Bank of India. In light of current economic circumstances, it has proposed to offer financial assistance to MSME producing essential goods. The details for the same are as follows —

  • Processing Time: 48 hours
  • Processing Fees: Nil
  • Rate of Interest: 5%
  • Maximum Amount of Loan: 50 lakhs (Safe scheme) and 1 crore (Safe Plus scheme)


  • Under these schemes, funds of ₹ 100 crores are placed for each of the two. There will be no additional charges for the same. The application and complete procedure need to be done online. MSME dealing with essential goods like food, sanitizer, masks, gloves, etc. are eligible for applying to these schemes.

    Therefore, if one takes a closer look at all the schemes available for MSMEs during the COVID-19 pandemic, it is actually beneficial to use these at an advantage to help an enterprise sustain. This will eventually help in recovering the overall economic situation of the country. Apart from these, there are many other loan schemes recently introduced in the wake of the pandemic by various financial institutions. Private banks are also providing excellent support and term loans for the same.

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