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Basic Eligibility criterion


As we all know that on 12th May 2020 our Honorable Prime Minister Announced a budget of Rs. 20 Lakh crore for MSME under Aatm Nirbhar Bharat Package. There will be a 100% credit guarantee cover and to Banks and on principal and interest and the scheme can be availed till October 31, 2020. This is expected to benefit 45 lakh units. To provide stressed MSMEs with equity support, Government will also facilitate provision of Rs. 20,000 crore as subordinate debt.

Union Finance Minister Nirmala Sitharaman on Wednesday announced Rs 3 lakh crore collateral-free automatic loans for businesses, including MSMEs.

Sitharaman stated that borrowers with up to Rs 25 crore outstanding and Rs 100 crore turnover will be eligible for these. The loans will have a four year tenor with a moratorium of 12 months on principal payment, while interest will be capped, she added.


New MSME Definition

The distinction between the manufacturing and services enterprises has been removed by making the investment amount and annual turnover similar for enterprises engaged in both the sectors.

MSME – Merged Criteria: Investment and Annual Turnover

Sector/Enterprise Type

Micro Enterprise

Small Enterprise

Medium Enterprise

Manufacturing & Services Sector, Both

Investment less than Rs. 1 crore

Turnover less than Rs. 5 crore

Investment less than Rs. 10 crore

Turnover up to Rs. 50 crore

Investment less than Rs. 20 crore

Turnover up to Rs. 100 crore

Key Takeaways of New MSME Definition introduced in Atmanirbhar Bharat Abhiyan‘ or Self-reliant India Scheme 2020 by Government of India.

  • Collateral Free Loans to MSMEs
  • MSME Loans worth of Rs. 3 lakh crore
  • Moratorium period offered is 12 months
  • Manufacturing and Service MSMEs shall be considered as same entities
  • Repayment Tenure of 48 months
  • 100% Credit Guarantee
  • To benefit approx. 45 lakh units


MSME loans are offered to Micro, Small and Medium Enterprises (MSMEs) by financial institutions that include banks and NBFCs. MSME loans are also offered by government with the help of various schemes which are further discussed. Government Schemes that come under MSME loans include Mudra Loan, CGTMSE, PMEGP, etc. These schemes ensure that the new and existing entrepreneurs in the country get the necessary financial support and funding for their businesses.


MUDRA (Micro Unit Development and Refinance Agency) was introduced to provide support to the small business owners. MUDRA yojana is further classified between three categories named as Shishu, Kishore and Tarun.

In the Shishu category, an MSME loan is provided up to Rs. 50,000 to a Start-Up enterprise. In the Kishore category, a loan of up to Rs. 5 lakh is provided to the companies that have been running for a while and want to get more established. In the Tarun category, the MSME loan is provided up to Rs. 10 lakh to companies that are established and are looking for expansion. The maximum repayment tenure is of 60 months for all Mudra loan categories.

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

CGTMSE (Credit Guarantee Funds Trust for Micro and Small Enterprises) was introduced to establish a strong credit relief system and promote a better credit flow for the MSME sector. Under the CGTMSE scheme, the loan is backed without any external collateral or third party guarantee.

Here, the MSME loan sanctioned by the Member Lending Institution (MLI) is backed by the scheme which provides the guarantee cover for a large portion of the loan amount. Under CGTMSE scheme, both new and existing medium, small, and micro enterprises, including service enterprises are eligible for a maximum credit cap of Rs. 2 crore.

CGTMSE also offers rehabilitation assistance to the units. Any MSME unit that is in a bad condition due to the factors beyond the control of management is supported by the CGTMSE rehabilitation assistance. The maximum credit cap of Rs. 1 crore is offered to the dilapidated MSME units.

Eligibility of CGTMSE Scheme

CGTMSE scheme is offered to various institutions which are as follows:

  • Scheduled Commercial Banks
  • Regional Rural Banks (RRBs)
  • National Small Industries Corporation (NSIC)
  • North Eastern Development Finance Corporation (NEDFi)
  • Small Industries Development Bank of India (SIDBI)

CGTMSE scheme aids all new and existing medium, small, and micro enterprise borrowers who fulfil the conditions mentioned below:

  • The trust guarantees up to 75% of the defaulted principal amount for all categories and up to 85% of the defaulted principal amount for selected category of borrowers. The maximum guarantee cap is kept at Rs. 62.50 lakh / Rs. 65 lakh for the credit facilities up to Rs. 50 lakh
  • Associated charges such as penal interest, commitment charge, and service charge including any other levy / expenses are not covered by the scheme
  • Small and micro enterprises owned and / or operated by women are also eligible for a guarantee cover of 80% and all the credit/loans in the North East Region (NER) for credit facilities are eligible for a guarantee of Rs. 40 lakh. Other aspects such as retail trade, educational institutions, agriculture, training institutions, and self-help groups (SHGs) are not eligible for guarantee cover under the scheme

PMEGP (Prime Minister’s Employment Generation Programme)

PMEGP is a credit linked subsidy program which was integrated with two other schemes, namely, Prime Minister’s Rojgar Yojana (PMRY) and the Rural Employment Generation Programme (REGP), to generate employment among the educated youth of the country. Under PMEGP scheme, the beneficiary has to invest close to 5-10% of the project cost while the government grants a subsidy of 15-35% of the project. The participating banks offer the rest of the funds as term loans to the business owners.

Subsidy and funding under PMEGP

Beneficiary Categories

Beneficiary’s Share

(of Total Project)

Subsidy Rate

(from Govt.) – Urban

Subsidy Rate

(from Govt.) – Rural









To avail PMEGP loan, individuals and organizations should meets certain criteria which are listed below:

  • Age Criteria: Min. 18 years & Education Qualification: 8th class passed for individuals
  • Must be a part of Self-Help Group (SHG)
  • Societies that are registered under Societies Registration Act, 1860
  • Production Co-operative Societies
  • Charitable Trusts

Sub-Schemes offered under Mudra Loan Yojana: Mudra loan or Mudra Yojana comes with sub-schemes designed for specific business needs and requirements. The section includes sub-schemes such as:

  • Credit for Micro Enterprises: This sub-scheme focuses on maximizing the involvement of micro enterprises in the economic development. The additional benefits cover a large number of beneficiaries running micro enterprises. The major segments of the population that are involved in land transport, food production, textile, and community services may take advantage of the scheme and set up their own small business unit
  • Mahila Uddyami Scheme: This scheme is designed specifically for women entrepreneurs. It has an objective of encouraging women, groups of women, joint liability groups, and self-help groups of women to set up micro business entities. Under this scheme, special interest concessions are also granted
  • Refinance Scheme for Banks: Mudra Yojana also refinances MSME loan amounts of up to Rs. 10 lakh extended by the banks to the borrowers. However, only manufacturing and service sector MSME unit owners can obtain the benefits of this refinancing scheme
  • Micro-Credit Scheme: Micro-credit schemes focus on Micro Finance Institutions (MFIs) and provide them with the financial support to make their lending operations available for individuals, group of individuals, or micro business entities
  • Mudra Card: This is an extraordinary product that makes the funds from the MSME loan easily accessible to the cardholder and also offers significant flexibility. Mudra Card can be used as a credit card for the assigned overdraft limit and it can also be used as a debit card for ATM withdrawals
  • Credit Guarantee Fund: The credit guarantee fund is created to reduce the risk for lending institutions. The fund provides loans worth more than Rs. 1 lakh crore to manage the risk faced by lending institutions
  • Equipment Finance Scheme: This scheme is designed to help micro enterprises expand their business. Technically advanced equipment can be purchased through finance with the help of this scheme. It can help organizations in increasing their production and expand their horizons of profitability and sustainability.

Documents Required for MSME Loan

  • Duly filled Application form
  • Identity Proof: Passport, driving licence, PAN card, Voter’s identity card
  • Residence Proof: Passport, lease agreement, trade license, telephone and electricity bills, ration card and sales tax certificate
  • Age Proof: Passport, Voter’s identity card, Photo PAN card

Financial Documents:

  • Last 12 months’ bank statement
  • Business registration proof
  • Proprietor(s) PAN Card Copy
  • Partnership deed copy
  • Company PAN card copy
  • P&L and balance sheet copy of last 2 years
  • Sales tax documents
  • Municipal tax document



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