The Micro, Small and Medium Enterprises (MSMEs) were part of the four major themes highlighted by Finance Minister Nirmala Sitharaman in the Union Budget 2024-25 announced in the parliament on Tuesday. Among other benefits announced for them in the budget, Micro, Small, and Medium Enterprises will now be able to avail loans up to Rs 20 lakh under the Mudra scheme.
Highlighting that the Central Government has formulated a package that covers financing, regulatory changes and technology support for MSMEs to help them grow and compete globally, the Finance Minister said, “This budget provides special attention to MSMEs and manufacturing, particularly labour-intensive manufacturing.”
The Union Finance Minister proposed the following specific measures in support of MSMEs:
Credit Guarantee Scheme
A Credit Guarantee Scheme for facilitating term loans to MSMEs has been proposed in the budget. This will help MSMEs in purchasing machinery and equipment without collateral or third-party guarantee. The scheme will operate on pooling of credit risks of such MSMEs.
“The (credit guarantee) scheme will operate on pooling of credit risks of such MSMEs. A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to Rs 100 crore, while the loan amount may be larger. The borrower will have to provide an upfront guarantee fee and an annual guarantee fee on the reducing loan balance,” the Finance Minister said.
Public Sector Banks will assess MSMEs for credit
Public Sector Banks will assess MSMEs for credit, instead of relying on external assessment, as announced by the Minister during her budget presentation. This step is taken by the government to make credit more accessible to MSMEs. Public Sector Banks will also take a lead in developing or getting developed a new credit assessment model, based on the scoring of digital footprints of MSMEs in the economy.
“This is expected to be a significant improvement over the traditional assessment of credit eligibility based only on asset or turnover criteria. That will also cover MSMEs without a formal accounting system,” stated the Union Finance Minister.
Govt promoted fund to support MSMEs during stress with credit
A new mechanism will facilitate continuation of bank credit to MSMEs during their stress period. While being in the ‘special mention account’ stage for reasons beyond their control, MSMEs need credit to continue their business and to avoid getting into the Non-Performing Assets stage. Credit availability will be supported through a guarantee from a government promoted fund.
Mudra loans limit to be enhanced
Pradhan Mantri Mudra Yojana was launched in 2015 to provide loans up to Rs 10 lakh to small and micro enterprises from commercial banks, small finance banks, and non-banking financial corporations.
It was announced in the Union Budget 2024-25 that the limit of Mudra loans will be enhanced from the current Rs 10 lakh to Rs 20 lakh for those entrepreneurs who have availed and successfully repaid previous loans under the ‘Tarun’ category.
Small Industries Development Bank to serve all major MSME clusters
Small Industries Development Bank of India (SIDBI) will open new branches to expand its reach to serve all major MSME clusters within 3 years, and provide direct credit to them. With the opening of 24 such branches this year, the service coverage will expand to 168 out of 242 major clusters.
E-Commerce Export Hubs to facilitate MSMEs and traditional artisans
To enable MSMEs and traditional artisans to sell their products in international markets, E-Commerce Export Hubs will be set up in public-private-partnership (PPP) mode. These hubs, under a seamless regulatory and logistic framework, will facilitate trade and export related services under one roof.
Financial support for Food Irradiation, Quality & Safety Testing
Financial support will be given for setting up of 50 multi-product food irradiation units in the MSME sector. Setting up of 100 food quality and safety testing labs with NABL accreditation will be facilitated.
Turnover threshold of buyers reduced to half
The turnover threshold of buyers for mandatory onboarding on the TReDS platform will be slashed from Rs 250 crore, announced Sitharaman. MSMEs can now get access to cash by selling their unpaid invoices (trade receivables) on a platform called TReDS. Currently, only big companies (with a turnover of Rs 500 crore) are allowed to use this platform. This threshold is being lowered to Rs 250 crore, to enable more companies to use the platform. This measure, apart from including medium enterprises, will also bring 22 more central public sector enterprises and 7,000 more companies onto the platform, said the minister.
