MSME Loans : Get MSME loans up to Rs 1 crore in 59 minutes

Updated on: Oct 20th, 2023

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8 min read

In this article, we will discuss about MSMEs and how to get MSME loans in detail.

What are MSMEs?

The term MSME refers to Micro, Small & Medium Enterprises (MSME), which includes both manufacturing and service enterprises. The existing MSME classification was based on the criteria of investment in plant and machinery or equipment. So, to enjoy the MSME benefits, they have to limit their investment to a lower limit, as mentioned below:  

Existing MSME Classification
 
SectorCriteriaMicroSmallMedium
ManufacturingInvestment < Rs.25 lakh< Rs.5 crore< Rs.10 crore
ServicesInvestment < Rs.10 lakh< Rs.2 crore< Rs.5 crore

These lower limits are killing the urge to grow as they are unable to scale their businesses further. Also, there has been a long-pending demand for the revision of MSME classification so that they can further expand their operations while continuing to avail the MSME benefits. Now, under the Atmanirbhar Bharat Abhiyan, the government revised the MSME classification by inserting composite criteria of both investment and annual turnover. Also, the distinction between the manufacturing and the services sectors under the MSME definition has been removed. This removal will create parity between the sectors. The following is the revised MSME classification, where the investment and annual turnover, both are to be considered for deciding an MSME.  

Revised MSME Classification
CriteriaMicroSmallMedium*
Investment Annual Turnover< Rs.1 crore  &   < Rs.5 crore< Rs.10 crore & < Rs.50 crore< Rs.50 crore & < Rs.250 crore

* Further upward revision made by the government.

MSME Loans up to 1 crore in 59 minutes

Recently, the Government of India has made an announcement to offer MSME loans up to 1 crore with interest rates starting from 8% within 59 minutes. This historic initiative is aimed at developing the MSME sector and this will improve the credit availability to a greater extent. In this regard, a new web portal was launched. This is a dedicated digital platform for this purpose. Availing loan through this online portal will bring about a major transition in the way loans are offered to the MSME sector; i.e. the processing of loans will now be fully automated. Earlier, the loans used to be processed in about a month’s time. However, this new portal will now reduce the processing time to less than a minute (with the submission of all necessary documents). Once the loan is approved in this manner, it will be disbursed to the applicant in the next seven or eight working days.

More details on the new web portal:

  • This web portal is designed using advanced algorithms which are integrated with the data related to GST, income tax returns, bank statements, fraud checks and bureau checks.
  • The automated programme compares the data points from these various sources and analyses the loan eligibility of the applicant.
  • It is the first of its kind with banker interface and connects with multiple banks without visiting the branches.
  • The loan will be largely provided by Small Industries Development Bank of India (SIDBI) along with other Public Sector Banks (PSBs).
  • PSBs include State Bank of India, Punjab National Bank, Bank of Baroda, Indian Overseas Bank and Vijaya Bank.
  • Loans are approved by the bank using digital scoring model and methods which are as per the bank’s credit policy.
  • This web portal is also integrated with the Credit Guarantee Fund Trust for Micro and Small Enterprises scheme which makes it easy to avail the loan without the mandatory requirement for collateral security.
  • It is important to note that loans are processed without manual intervention until the stage of approval and disbursement of the loan.
  • Once the loan is approved, a convenience fee of Rs 1,000 will be charged from the applicant.

Documents required to avail the loan using the web portal:

  • GST Identification Number and GST login details.
  • Bank statement for six months in PDF format.
  • Last three years income tax return in XML format and e-filing details.
  • Details of the Partner/Director – both personal and educational information will be required.

Steps for registering in the web portal:

  • Use the official web portal.
  • Complete the login by registering the name, email ID, mobile number, etc.
  • Registration is complete once you enter the OTP received on the registered mobile number.
  • The next screen will request for some more basic details and a confirmation message will show up on the screen.
  • Enter PAN, GST, and income tax return details.
  • Upload the documents.
  • Upload the last six months’ bank statement or the banking login details.
  • Once it is done, enter the loan purpose. Details of any loan taken previously should also be disclosed.
  • Select the bank through which the loan should be processed among the given list of banks.
  • Pay the convenience fee and download the approval letter.

Other points to be considered:

  • Based on the data submitted by the applicant, the initial principal amount will be approved. The actual disbursement of the loan will be done only after conducting due diligence by the banks.
  • Further specifications about the loan such as the loan amount, the rate of interest, the processing fee, etc. will be displayed in the portal and the applicant has to choose according to the requirement.
  • Though the applicant requests for a certain loan amount, it is possible that a lesser value is eligible for approval. This is because sometimes the applicant’s data might not match the eligible parameters set by the lenders. In such cases, the applicant has to confirm if the process should be continued with the reduced loan amount or not.
  • Another important consideration is the promoter’s contribution. A certain percentage of the loan amount has to be contributed or invested by the promoters from their own funds.
  • The Partners/ Director’s ownership details submitted are used to validate their credit history and verify the Bureau scores to confirm the credibility.
  • There is an option for manual processing of the loan application. Once the applicant selects the branch for manual processing, an email in this regard is sent to the branch and the applicant. Based on this, the applicant can take it forward with the branch officers for further processing.
  • If any of the required details are not submitted or if there is any mismatch in the data provided by the applicant, the application will not be processed by the web portal.
  • With respect to GST registered firms, there is an option to apply for the loan through the GST web portal itself. As an additional benefit, such firms will get 2% interest subvention on the loans availed.

For more details on the recent MSME loans, click here.

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Quick Summary

The article discusses the MSME classification, revised criteria for MSMEs, and the new web portal offering MSME loans up to 1 crore with an interest rate of 8% within 59 minutes. It explains the process details, required documents, and important considerations for loan approval.

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