The approvals came days after the Finance Minister Nirmala Sitharaman had announced measures for MSME revival as part of the Rs 20 lakh crore economic package.

Credit and Finance for MSMEs: MSME Minister Nitin Gadkari on Monday said that the Cabinet has approved the distressed assets fund of Rs 4,000 crore and Fund of Funds with a corpus of Rs 10,000 crore to support MSMEs. The distressed fund is part of the Rs 20,000 crore subordinate debt announced by Finance Minister Nirmala Sitharaman earlier this month as part of the economic package. The government will provide Rs 4,000 crore support to the CGTMSE, which will give partial credit guarantee support to banks, to lend to MSMEs. “This distressed asset fund is of Rs 4,000 crore wherein we will provide credit guarantee of up to Rs 75 lakh or 15 per cent of the credit. This is a 20,000 crore fund for MSMEs under stress and will benefit 2 lakh units to restart operations,” Gadkari said at a press briefing. The minister said that 6 lakh MSME loan accounts were restructured till March 21 while another 25 lakh are expected to undergo restructuring till December 31.

“These Cabinet approval setting out modalities and road map for financial packages meant for MSMEs would turn out to be a great relief in these hours of crises as it will further strengthen the liquidity issues of MSMEs and provide much-needed business support,” Harish Kumar, Partner, L&L Partners told Financial Express Online.

Also read: Cabinet approves revision in MSME definition, Rs 50,000 crore equity infusion scheme

On the other hand, the Fund of Funds, said Gadkari will encourage MSMEs having good credit rating and GST record to list on stock exchanges wherein the government will buy up to 15 per cent equity in them. For example, Rs 7.5 crore in equity will be purchased by the government if the MSME raises Rs 50 crore. “In three-four years when these shares are priced 3-4X more we will sell them and increase the amount to Rs 1 lakh crore,” Gadkari had said recently. For instance, if shares are offloaded in four years, priced at Rs 60 from Rs 10, the government will add Rs 50 to the fund.

The approvals to the two funds came along with the approval to the revision in MSME definition wherein for medium enterprises, the investment and turnover limit was revised from Rs 20 crore and Rs 100 crore respectively to Rs 50 crore and Rs 250 crore. The revision was made following the announcement made in the economic package in changing the MSME definition from earlier based on investment in plant and machinery to a mix of investment and turnover. However, “it was decided that MSMEs turnover from exports will be excluded from the definition,” Gadkari said.