Interest rates on collateral-free loans extended by banks and financial institutions have been capped at 9.25 per cent and at 12 per cent for loans extended by non-banking financial companies (NBFCs) to micro, small and medium enterprises (MSMEs) under the recently announced package.
The package, approved by the Cabinet on Wednesday, carries lower interest rate than normally charged by banks and NBFCs.
Banks charge 11-13 per cent interest rates and NBFCs charge 16-23 per cent interest rates from MSMes, said Ashok Sehgal, co-chairman CII National MSME Council.
The remianing features of the package were already detailed in the presentation made by the finance minister.
The loans will have a moratorium of a year on the principal amount, and must be repaid in four years thereafter.
The loans will carry hundred per cent guarantee provided by National Credit Guarantee Trustee Company Limited (NCGTC) for additional funding of up to Rs three trillion to eligible MSMEs.
All MSMEs with an annual turnover of up to Rs 100 crore and having outstanding credit of up to Rs 25 crore as on February 29 this year would be eligible under the scheme.
MSMEs can avail up to 20 per cent of the their outstanding credit subject to the above mentioned limit for working capital or addditional term loans.
The presentation made by finance minister Nirmala Sitharaman earlier had said that 4.5 million units can resume business activity and safeguard jobs through this scheme. According to the National Sample Survey, conducted during 2015-16, there were 63.4 million MSMEs in the country.