Credit Guarantee Limit for Small Businesses Extended

The union government has doubled the credit guarantee limit for small and medium businesses to Rs. 2 crore to help them tide over the liquidity problems.

Government underwrites loans given by banks to small businesses through a trust. So far, loans were covered upto one crore rupees. This limit is now being enhanced to Rs. 2 crore.

Earlier, the scheme only covered bank loans. It will cover loans given by NBFCs (non-banking financial companies) as well.

This decision will enable better access to credit for small shop-owners and small enterprises,  adding banks and NBFCs “will not” levy high interest on these loans, as the government is bearing the cost of underwriting them.

MSME sector, which provides bulk of employment, accounts for 45 per cent of India’s manufacturing; 40 per cent of exports and nearly 8 per cent to the country’s GDP.

A few days back, government announced a major tax relief for small businesses. Income of businesses with turnover of up to Rs. 2 crore was calculated at 8 per cent of the turnover.

Now, for such businesses income from digital transactions will be calculated at 6 per cent. This will effectively reduce their tax liability by 25 per cent.