Union Cabinet Launches Special Micro-Credit Scheme

In order to revive businesses of street vendors that have taken a serious hit due to the COVID-19 lockdown, the Centre on on 1st June announced a special micro-credit facility amounting to a total of Rs 5,000 crore that will provide them Rs 10,000 as initial working capital.

In today’s cabinet meeting the government has approved the loan scheme for the street vendors.

This scheme was a part of Finance Minister Nirmala Sitharaman’s Rs 20 trillion economic stimulus package to reboot the Indian economy that has been severely hit by the coronavirus pandemic. The package was announced on 14 May.

It stated that there will be no penalty on early repayment of loan.

  • Highlights:
    • This is for the first time in India’s history that street vendors from urban/ rural areas have become beneficiaries of an urban livelihood programme.
    • The vendors can avail a working capital loan of up to Rs 10,000, which is repayable in monthly installments in the tenure of one year.
    • On timely/ early repayment of the loan, an interest subsidy @ 7% per annum will be credited to the bank accounts of beneficiaries through Direct Benefit Transfer on six monthly basis.
    • The scheme incentivises digital transactions by the street vendors through monthly cashback.

The Ministry of Housing and Urban Affairs has launched a Special Micro-Credit Facility Scheme – PM SVANidhi – PM Street Vendor’s AtmaNirbharNidhi, for providing affordable loans to street vendors, the government release said.

Those who were vending till 24 March this year can avail the benefits of the scheme, the duration of which is till March 2022, the statement said.

“The vendors can avail a working capital loan of up to Rs 10,000, which is repayable in monthly installments in the tenure of one year.

“On timely or early repayment of the loan, an interest subsidy of seven per cent per annum will be credited to the bank accounts of the beneficiaries through direct benefit transfer on six monthly basis,” the ministry said. It stated that there will be no penalty on early repayment of loan.

The government press statement said “The Government of India is sensitive towards the problems they have faced in the wake of the COVID-19 crisis. In such a time, there is an urgent need to provide affordable credit to them to ensure their business gets a boost”.

MoHUA in collaboration with State Governments, State Missions of DAY-NULM, ULBs, SIDBI, CGTMSE, NPCI and Digital Payment Aggregators will also launch a capacity building and financial literacy programme of all the stakeholders and IEC activities throughout the country during the month of June and loaning will commence in the month of July.

Procedure for Obtaining Loan –
Under the Micro Credit Scheme, following procedure shall be followed:
A)In the event of NGO/SHG intending to implement MCS through the SCA; the following process shall follow:
i)Application shall be made by the NGO to the respective SCA (State Channelising Agency) in which it is situated, in prescribed application form alongwith all relevant details & documents.
ii)SCA shall be scrutinize the application and verify credentials of NGO in order to satisfy itself regarding the suitability of the NGO for implementation of the Scheme. 
iii)The SCA may sanction loan upto Rs. 2.0 lakh to an NGO for further financing to Self-Help Group (SHGs) of disabled persons or beneficiaries.
iv) Application of an NGO for loan amounting to more than Rs. 2.0 lakh (Rupees Two Lakh only) will be scrutinized by the SCA and forwarded to NHFDC for sanction with due recommendation and credential verification report of the NGO.
B)In case where the NGO submits application for financial assistance under the scheme directly to NHFDC, the following process shall follow: i)Credentials of the NGO would be verified in such manner as CMD,NHFDC may think fit.
ii)Suitability of the NGO for implementation of Micro Credit Scheme shall be examined and the decision of CMD,NHFDC in this regard shall be final.
iii)In case loan assistance is sanctioned to the NGO, no amount shall be released to it unless the NGO accepted the terms & conditions of sanction and convey the same to NHFDC
Procedure for Obtaining Loan under the Micro Credit Scheme
Micro Credit scheme

Main Features of the Scheme:

Purpose of Loan –
Purpose of the loan is to provide financial assistance to weaker section of the disabled for starting or augmenting income generation activities.The illustrative nature of income generating activities is given below :
i) Small business/trade
ii) Tiny/cottage industry or service activity
iii) Artisan activities
iv) Agricultural and allied activities
v) Transport sector activities
Quantum of Loan and Rate of Interest –
i)No upper limit of loan in case the scheme is implemented by the SCA itself for further disbursement by it  to PwDs.
ii)In case of loan to NGO either through SCA or directly by NHFDC, the maximum loan amount shall be limited to Rs.10.0 lakh (Rupees Ten Lakh only).  However, the NGO may be sanction repeated loan considering its previous performance, repayment record, utilization of loans etc.  However, at any given time, the principal amount outstanding against the NGO will not exceed Rs. 10.0 lakh. NHFDC would provide 100% funding of the sanctioned projects.
iii)In both cases (i) and (ii) above, the maximum amount of loan to a beneficiary will be limited to Rs.50,000/- (Rupees Fifty Thousand only).
Interest & Rebate –
i)Interest payable by the beneficiaries shall not exceed 5% per annum.
ii)The lending rate of NHFDC to the SCA will be 2% per annum.
iii)The interest spread of 3% may be divided between the SCA and NGO as per their mutual agreement.
iv)In cases where the loan is directly extended by NHFDC to NGO/SHG, interest payable by the beneficiaries shall not exceed 5% per annum.
v)A rebate of 1% per annum on interest rate will be admissible to women beneficiaries. In this case, the lending rate of NHFDC to the SCA will be 1% per annum.
vi)In addition to (v) above, a further rebate of 0.5% per annum on interest rate will be admissible to PwDs under VH/HH/MR category. 
Eligibility Criteria of Beneficiaries –
i) Any Indian Citizen with 40% or more disability
ii) Age above 18 years.
iii) The borrowers already covered under any other scheme of financing sponsored by Central or State Government or financing institutions and having outstanding loans against their names shall not be eligible.
iv) The borrowers should preferably be regular member of Thrift and Credit Group (Self Help Group).
v) Preference will be given to women beneficiaries.
vi) Relevant educational/technical/vocational qualification, experience and background.
Security –
i)Fund under Micro Credit Scheme will be released only to those SCAs who have executed the General Loan Agreement and provided adequate Block Government Guarantee.
ii)The SCA will be free to decide on the security from the NGO implementing the scheme through it.
iii)Where the loan is extended by NHFDC directly to the NGO, it would be required to deposit an amount equal to 30% of the total sanctioned amount pledged as FDR or Bank Guarantee for 30% of loan amount.
Repayment –
Term loans drawn from NHFDC will be required to be repaid within a period of 36 months in quarterly installments. The installments of term loan and interest shall be repayable to NHFDC on 30th June, 30th September, 31st December and 31st March every year or on such other dates as agreed to by NHFDC. Six days grace period will be admissible for payment of any installment to NHFDC.
Grant for promotion/training –
A grant of Rs. 2,000/- for every block of loan amount of Rs. 1.0 lakh, will also be provided by NHFDC to the NGO for training, orientation/ motivation of the beneficiaries, capacity building and organizing SHGs, awareness creation and administrative expenses. There will be no ceiling of the amount of grant to an NGO.

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