New Delhi: In a move aimed at improving monetary policy transmission and supporting micro, small, and medium enterprises (MSMEs), the Reserve Bank of India (RBI) has advised banks to link loans to MSMEs to an external benchmark, the Government of India informed Parliament.
External Benchmark System for MSME Loans
Under the new system, the reset clause for loans has been reduced to three months. Existing borrowers will also be able to benefit from the external benchmark-based interest regime, as banks have been advised to provide a switchover option on mutually agreed terms. This step is expected to enhance transparency and ensure faster pass-through of policy rate changes to MSME borrowers.
Quality Control Orders with MSME-Friendly Exemptions
Minister of State for Micro, Small and Medium Enterprises, Shobha Karandlaje, highlighted that the government implements Quality Control Orders (QCOs) through the Bureau of Indian Standards (BIS) and the Department of Consumer Affairs, with phase-wise exemptions and relaxations for MSMEs to prevent disruption of domestic production.
Key relief measures under QCOs include:
- Extensions of compliance deadlines: six months for micro enterprises and three months for small enterprises.
- Exemptions for imports required for producing export-oriented products or up to 200 units for research and development purposes.
- Clearance of legacy stock manufactured or imported before QCO implementation within six months.
Financial Incentives and Simplifications for MSMEs
BIS provides financial incentives for MSMEs through reduced annual minimum marking fees:
- 80% concession for micro enterprises
- 50% for small enterprises
- 20% for medium enterprises
Additional concessions of 10% are available for units in the Northeast or MSMEs run by women entrepreneurs. The requirement to maintain in-house laboratories has also been made optional for MSMEs.
Mutual Credit Guarantee Scheme and Collateral-Free Loans
To further ease access to credit, the government has launched the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME), providing credit guarantees to help units secure loans, particularly for purchasing essential equipment and machinery. Scheduled Commercial Banks are also mandated not to accept collateral for loans up to Rs 10 lakh to micro and small enterprises.
Impact on MSMEs
These measures are expected to strengthen the financial support ecosystem for MSMEs, improve credit accessibility, reduce operational hurdles, and promote growth and sustainability of small businesses across India.
