MANISH GUPTA
Ranchi, Aug 18: The central government is planning to launch a credit card for vendors and small traders by the name MSME Vyapar Credit Card (MVCC) and Small Industries Development Bank of India (SIDBI) has prepared a concept note on it.
As per the concept note, drafted by SIDBI along with members of NABARD, NPCI, IBA and SBI, the credit card is primarily meant for non-GST registered informal micro enterprises like self-help group (SHG) members, tea sellers, salons and restaurants.
However, MVCC is proposed to be an umbrella brand for all MSME credit cards for both GST and non-GST registered businesses with differentiated features.
“MVCC should provide a card which is issued to a large number of micro and small businesses providing a small self regulated revolving limit. It could be the first such revolving credit facility for the end borrowers offering limits which are priced lower than their current credit lines,” SIDBI noted.
The quantum of credit has been suggested in the range of Rs 10,000 to Rs 50,000 for non-GST registered micro businesses with interest free period of 20 to 50 days and moderate financing charges for rollovers by paying minimum monthly dues. And, Rs 50,000 and above credit provision for GST registered MSMEs.
MVCC aims to meet the need of working capital for small businessmen on the lines of Kisan Credit Card (KCC) meant for farmers. The note is based on the recommendations of the Standing Committee on Finance which presented its report in April 2022.
“Most micro enterprises are expected to be service sector/ trading enterprises with a working capital cycle usually around 1-1.5 months. Thus the free credit period proposed in MVCC makes it a very relevant instrument,” the bank said.
Going by the speed at which the central government has taken up the matter, it seems that the MVCC will soon be a reality. As SIDBI already has budgetary provision for advancing loans to small businesses, it can be passed by an executive order.
Former Rajya Sabha MP Mahesh Poddar, while he was in the Standing Committee of Finance, had written a letter on 23 December 2021 to Prime Minister Narendra Modi suggesting the Vyapar Credit Card scheme for micro and small enterprises.
“Vyapar Credit Card can act as a force multiplier for the sector since enterprises will have easy institutional alternatives to the expensive emergency credit. Similar to KCC, VCC can also have a component of collateral free loan which can ensure financial buoyancy to a sector which was hit the hardest by the pandemic,” Poddar’s letter said.
Speaking to lagatar24.com, Poddar said, “This credit card can be a major support to the small vendors and traders for meeting their working capital needs and also to scale up and diversify their businesses. The scheme can be launched soon or as part of the next year’s budget. It is on the lines of KCC. The net cost of loans for farmers comes to only 5 per cent as against the market rate of 25 per cent due to KCC.”
