October 09, 2020 / Garima Khetan


The Reserve Bank of India (“RBI”) on October 07, 2020 issued a circular directed to all Co-operative Banks wherein the RBI has provided some relief to the Micro Small and Medium Enterprises by extending Interest Subvention Scheme on loans extended by co-operative banks.

It has been specifically outlined that decision has been taken to include Co-operative Banks as eligible lending institutions effective March 03, 2020. The Scheme provides an interest relief of 2% p.a. (two percent per annum) to eligible MSMEs on their outstanding fresh or incremental term loan or working capital during the period of its validity, which is limited to all term loans or working capital to the extent of Rs.100 lakhs. That is to say that any amount beyond Rs.100 lakhs shall not be covered under this Scheme.

The loan amounts to be eligible for this relief, should not have been declared as a Non-Performing Asset. No interest subvention shall be admissible for any period during which the account remains NPA.

The Interest Subvention Scheme for MSMEs, 2018 that was issue by the RBI on November 02, 2018 has been modified by the Government as below:

  • The validity of the Scheme has been extended till March 31, 2021.
  • Fresh or incremental term loan or working capital limit extended by co-operative banks with effect from March 03,2020 shall be eligible for coverage under the Scheme.
  • Acceptance of claims in multiple lots for a given half-year by eligible institutions shall be permitted.
  • Requirement of Udyog Aadhaar Number (UAN) may be dispensed with for units eligible for GST. However, units that are not required to obtain GST may either submit Income Tax PAN or their loan account must be categorized as MSME by the concerned bank.
  • Trading activities have also been allowed to be covered under the scheme without UAN.

It has been specified that Small Industries Development Bank of India (SIDBI) shall be the single national level nodal implementation agency for this Scheme. Nodal office of eligible lending institutions shall submit half-yearly claims to SIDBI as per guidelines laid down in that regard.

Co-operative Banks have been advised to take necessary and appropriate actions for the successful implementation of the Scheme.

To read the full detail, please find link to the RBI Circular.