The Government of India has announced a package on 7.12.2008 of measures for stimulating the economy containing, intro-alia, the following decisions to support the Micro, Small and Medium Enterprises (MSME) Sector:

i) A refinance facility of Rs.7000 crore for SIDBI to support incremental lending, either directly to MSMEs or indirectly via banks, Non-Banking Financial Companies and State Financial Corporations to facilitate flow of credit to MSMEs.

ii) The current guarantee cover under Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE) on loans extended from Rs.50 lakh to Rs.1 crore with guarantee cover of 50 per cent to boost collateral free lending.

iii) The lock in period for loans covered under the existing credit guarantee scheme reduced from 24 to 18 months to encourage banks to cover more loans under this scheme.

iv) To advice Central Public Sector Enterprises and State Public Sector Enterprises to ensure prompt payment of bills of MSMEs.

This information was given by Shri Pawan Kumar Bansal, Minister of State for Finance in reply to a question raised by Shri Subhash Sureshchandra Deshmukh in Lok Sabha today (12-12-2008). MSME credit support expanded through refinance and enhanced collateral-free guarantee coverage, plus shorter lock-in and prompt payment advisories. Measures expand MSME credit availability by establishing a refinance facility for SIDBI to support incremental lending through banks, NBFCs and state financial corporations; increasing the loan threshold and setting a specified percentage guarantee cover under the credit guarantee scheme to promote collateral-free lending; reducing the lock-in period for guaranteed loans to encourage bank participation; and advising public sector enterprises to ensure prompt payment of MSME bills.