What the Draft MSME Policy Means for the MSME Sector?

Business Loans for MSMEs

As MSMEs are emerging as important pillars of the Indian economy, the MSME Ministry has released a National Draft Policy for the same. The objective of releasing this policy is to ensure adequate funding, proposing multiple measures to promote technology upgradation, competitiveness, and procurement of MSME products. 

The draft has also increased the availability of Business Loans for MSMEs. Among other measures suggested by the committee, the draft directs the creation of standard operating procedures (SOPs) for the registration of MSMEs and to review the framework for funding arrangements covering banks and Non-Banking Financial Companies (NBFCs). 

For state governments, the draft suggested developing State Policies for MSMEs that are aligned with the national policy to encourage small businesses in semi-urban and rural areas to register themselves as MSMEs. 

The objective of the draft MSME policy 

To improve entrepreneurs’ access to financial assistance, the draft suggested uniformity in various Business Loan options. In response to this, various lending institutions and NBFCs are offering Business Loans for MSMEs without collateral. These loans are customized about bank statements, cash flows, supply chains, demand behavior and working capital. 

The draft MSME policy was launched to bridge other gaps such as an inadequate supply of electricity and skilled labor, complex legislative and policy framework, and lack of synergy among stakeholders to enhance the productivity of MSMEs. 

Also Read: How to Bridge the Credit Gap for Micro and Small MSMEs?

The main purpose of the draft MSME policy is to bring about a comprehensive framework of actions and strategies for the development and enhancement of the MSME sector. As there are separate policies for states, small business owners present across rural areas can benefit from financial assistance. 

Key action areas of the draft policy include: 

  • Intergovernmental roles and responsibilities 
  • Legislation and regulatory framework for MSMEs in India 
  • Access to financial assistance for MSMEs 
  • Skill development 
  • Knowledge management 
  • Technology upgradation 
  • Ease of doing business 
  • Development of MSME code 
  • Exit code 

The policy stimulates the efficiency and productivity of MSMEs to generate more income and employment and to become a part of global and domestic value chains. It also promotes a conducive business environment, covering ‘ease of business’ and exit codes for MSMEs. 

How NBFCs are helping MSMEs gain financial assistance?

In addition to traditional banks, MSMEs can now rely on various other lending institutions and NBFCs for availing of loans. Digital lending is gaining more popularity by the day, making financial assistance more accessible to entrepreneurs and small business owners across remote parts of the country. 

NBFCs are offering various customized loan options for entrepreneurs and small business owners to meet their expansion goals. These options include Business Loans without collateral, Machinery Loans, and Loans Against Property. 

Barring Loan Against Property, the two loans mentioned above are collateral-free loans. This makes it easier for small business owners to apply for these loans as they do not have to submit any assets as collateral. 

Further, NBFCs are offering online Business Loan applications, ensuring a hassle-free loan application process. Borrowers only must visit their chosen lender’s official website and fill out the online application. Besides this, NBFCs require minimal Business Loan documents list which helps entrepreneurs and small business owners save time and meet the eligibility criteria of Business Loan for MSMEs. These loans are offered at attractive interest rates with no hidden charges. 

Moving forward 

The Draft MSME Policy was set in place to improve the development and enhance the productivity of MSMEs in India. As these enterprises are considered important pillars of the Indian economy, providing adequate financial assistance is crucial. 

Many lending institutions and NBFCs have broadened their reach by opening branches across towns and villages to offer Business Loans to those who are unable to apply online. With minimal Business Loan documents required, entrepreneurs and small business owners do not have to worry about the loan application process. 

Also Read: Tips on Availing a Lucrative Machinery Loan for MSME

Further, the Government of India has also launched various schemes and programs under which MSMEs can register themselves and leverage financial assistance. Apart from financial assistance, these schemes also cover skill development, funds for raw material procurement, knowledge development, and technology upgradation and adaptation. On the back of the policy, post registration, MSMEs can benefit from all these facilities and provisions. 

Uneeb Khan
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