The government is always moving to improve credit access to MSMEs, bringing out new schemes that can help support upcoming entrepreneurs. Over the years, many such attempts have supported the MSME sector and its growth, as it is vital to a fast-growing economy. The Vyapar Credit Card is another scheme the government plans to launch to support and further the development of MSMEs by providing them with better access to finance.
Everything About MSME Vyapar Credit Card
Vyapar Credit Card (VCC) is part of the Centre’s Merchant Credit Card (MCC) Scheme for traders and micro enterprises. The credit card may offer free credit to merchants and traders for up to 50 days and covers about 85% of Micro Units under the Credit Guarantee Fund for Micro Units scheme.
Besides this, the Vyapar Credit Card may also offer loans to farmers, who will get their versions via the Kisan Credit Card. The Kisan Credit Card will enable farmers to take out loans under the Merchant Credit Card scheme at nominal interest rates.
Need for an MSME Credit Card
Currently, over 60% of MSMEs are not borrowing from the financial sector, which has created a credit gap between Rs. 20 and 25 trillion. However, that does not mean that MSMEs are not borrowing money at all. Most of these companies usually go for private lenders at much higher interest rates but get access to limited resources.
So, there is a need to push schemes like the Merchant Credit Card, which can provide MSMEs with the funds they need through Vyapar Credit Cards. The roll-out of the Vyapar Credit Card will benefit every key individual and business in the MSME sector, whether a footpath hawker or saree weaver.
Benefits of MSME Vyapar Credit Card
As mentioned earlier, the MSME Card will benefit in many ways-
- For instance, these credit cards should help MSMEs and other small businesses raise the operating capital they will need to get going.
- Such a credit card should also help ensure that these enterprises generate enough revenue to keep afloat.
- Also, by offering capital loans to MSMEs at nominal interest rates, Vyapaar Credit Cards should be able to guarantee the credit required for them to stay in business.
- Vyapar Credit cards should also help set up a formal financing system for MSMEs and other small businesses by providing them with immediate financial assistance.
- From the Centre’s perspective, Vyapaar Credit Cards should help bridge credit gaps between Rs. 20 and 25 lakh crores.
- Moreover, such schemes will encourage the MSME sector to borrow more from the financial industry than private players.
- There is a need for an integrated digital ecosystem to help keep track of the MSME sector, and schemes like the Vyapar Credit Card should help propagate it.
Vyapar MSME Credit Card Eligibility
The Vyapar Credit card will be of the Rupay type, and only those enterprises classified as MSMEs will be eligible to apply for and get one. The eligibility requirements for obtaining the MSME Vyapar Credit Card are as follows-
- The business unit should be an MSME as per the revised definition regardless of the constitution and must register itself under Udyam.
- The accounts should not be overdue for renewal at the time of sanctioning of the card.
- The owner of the MSME should have a credit score of at least 700, or -1 if there is no credit history.
Vyapar Credit Card: Launch Date
The government will soon launch the Vyapar Credit Card for MSMEs. While the exact launch date seems uncertain, the Centre plans to launch a credit card for MSMEs linkable with UPI. The Indian Banks Association (IBA) is developing the framework for the Merchant Credit Card scheme along with the DFS and RBI.
Besides the DFS and the Reserve Bank of India, the commerce and industry ministries are lending a hand in coming up with such schemes for MSMEs and upcoming entrepreneurs.
The Centre may also launch other schemes besides the Vyapar Credit Card and Merchant Credit Card. For instance, there is a plan to offer short-term credit to entrepreneurs who want to set up businesses at low-interest rates, which ensures they get the working capital they need.
Moreover, such schemes also provide MSMEs with the cash flow they will need in times of uncertainty, such as a global economic recession. There are over 63 million MSMEs in India that will employ more than 110 million people. So, you can see why introducing schemes like the Vyapar Credit Card is beneficial.
1. What will be the nature of the MSME Vyapar Credit Card?
Under the Vyapar Credit Card scheme, MSMEs will get a part of the funds they will need for operations as Working Capital and the rest will be Overdraft or Cash Credit.
2. What will be the Loan Amount Limits under the Vyapar Credit Card Scheme?
MSMEs can take out loans of up to 20% of the sanctioned working capital, where the minimum limit is Rs. 20,000, and the maximum limit is Rs. 2 Lakhs.
3. Will the Credit Cards and Cash Credits or Overdrafts be Interchangeable?
No. You cannot interchange credit cards and cash credits or overdrafts.
4. What type of Credit Card will the MSME sector get under the Vyapar Credit Card Scheme?
The MSME sector will get a Rupay credit card under the Vyapar Credit Card Scheme.