In a significant move, the Narendra Modi government today announced several policy changes to boost the country’s micro, small and medium enterprises (MSMEs).

As part of the Rs 20 lakh crore package under the Atmanirbhar Bharat scheme, the Cabinet gave its approval to widen the definition of MSMEs. It also gave its go-ahead to entities with turnover of up to Rs 250 crore or investment up to Rs 50 crore to be qualified as medium enterprises.

“As this Government enters its second year, the Cabinet took important decisions that will have a transformative impact on the MSME sector, our hardworking farmers and street vendors. Today’s decisions will ensure a better quality of life for them,” Modi said in a tweet.

Information & Broadcasting Minister Prakash Javadekar, addressing the media after the Cabinet meeting, the first one in the second year of the Modi government, said that MSMEs are the backbone of the Indian economy. The move will also help the street vendors.

MSMEs which have investments of Rs 1 crore and turnover of Rs 5 crore will be now be classified as micro-units, while those with investment of Rs 10 crore and turnover of Rs 50 crore will be categorized as small units. Besides, businesses with investments of Rs 50 crore and turnover of Rs 250 cr will be classified as medium units.

Importantly, exports will not be excluded from the turnover cap.

The Cabinet also gave its nod for setting up a Rs 50,000-crore equity fund for MSMEs which would facilitate listing of these firms. Finance Minister Nirmala Sitharaman last month had laid the roadmap for economic recovery.

Meanwhile the country’s public sector banks have sanctioned collateral-free loans of Rs 3,200 crore to MSMEs in just a day on June 1, Sitharaman said in a tweet. The loans are part of the Rs 20-lakh package announced by the Minister last month to combat the economic impact of the nationwide lockdown.

“On a single day 1 June '20, #PSBs have sanctioned collateral-free loans worth Rs 3,200 crore through the Emergency Credit Line Guarantee Scheme," said a tweet from the office of Sitharaman.

“MSME in more than 3,000 Tier-II towns were covered in one day – today – under the collateral-free loans that will enable them to pay salaries, rent, and restocking expenses,” another tweet said.

The MSME sector, which provides millions of jobs, has been one of the worst impacted by the corona-induced lockdown.

The loans, which have been sanctioned aimed at providing the required liquidity and working capital for businesses, have been given under the Emergency Credit Line Guarantee Scheme..