What changed
The Government of India has included co-operative banks as eligible lending institutions under the Interest Subvention Scheme for MSMEs 2018, effective March 3, 2020. The scheme's validity has been extended to March 31, 2021. Trading activities are now covered without Udyog Aadhaar Number (UAN); non-GST units may submit PAN or be categorized as MSME by the bank. Claims can be submitted in multiple lots per half-year.
What it means for you
Co-operative banks can now offer a 2% interest relief on fresh or incremental term loans and working capital to eligible MSMEs, reducing the cost of credit for borrowers. Banks must ensure loan accounts are not NPA at the time of claim filing, and they need to coordinate with SIDBI for claim submissions. This expands the reach of the scheme to a wider set of MSMEs through co-operative lenders.
What you must do
- Update internal policies to include co-operative banks as eligible lenders under the scheme.
- Train branch staff on eligibility criteria, including GST registration for GST-eligible units, or PAN or MSME categorization for non-GST units.
- Set up a nodal office to submit half-yearly claims to SIDBI in the prescribed formats, with multiple lots permitted per half-year.
- Ensure loan accounts are classified as standard (non-NPA) before filing claims.
- Communicate the scheme benefits to MSME customers to encourage uptake.
Who it affects
Primary (Urban) Co-operative Banks, State Co-operative Banks, District Central Co-operative Banks, MSME borrowers with loans up to ₹100 lakh, SIDBI as nodal implementation agency
What is the interest subvention rate under this scheme?
The scheme provides an interest relief of 2% per annum on eligible fresh or incremental term loans and working capital to MSMEs.
Are trading activities covered under the scheme?
Yes, trading activities have been allowed without requiring a Udyog Aadhaar Number (UAN), as per the modifications.
How should co-operative banks submit claims?
Claims must be submitted half-yearly to SIDBI in the prescribed formats, and multiple lots per half-year are permitted.