The Centre announced several measures in the Budget 2024-25 to boost MSME sector including a credit guarantee scheme for facilitating term loans to purchase machinery and equipment without collateral or third-party guarantee in manufacturing sector. Other initiatives included new mechanism for stressed MSME players to avail of credit and setting up e-commerce exports hubs in public-private partnership, among others.
The credit guarantee scheme for MSMEs in manufacturing sector will operate on pooling of credit risks of such entities. “A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to ₹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 FM stated.
Credit availability for “stressed” MSMEs which are red-flagged under “special mention account” will also be supported through a guarantee from a government-promoted fund. This is being done to ensure such MSMEs can continue their business and not get into NPA stage. Meanwhile, Mudra loans limit has also been doubled to ₹20 lakh for those entrepreneurs who have availed of and successfully repaid previous loans under ‘Tarun’ category.
In a bid to ensure that wider number of MSME players get access to credit, the government has now asked public sector banks to build their own in-house capability to assess such entities for credit eligibility. It hopes this will lead to an improvement in traditional assessment mechanism which is only based on asset and turnover criteria.
e-comm hubs
To enable MSMEs and traditional artisans to tap into international demand, e-commerce export hubs will be set up in public-private partnership mode. The government will also give financial support for setting up 50 multi-product irradiation MSME units and facilitate setting up of 100 food quality and safety testing labs with NABL accreditation.
“For facilitating MSMEs to unlock their working capital by converting their trade receivables into cash, I propose to reduce the turnover threshold of buyers for mandatory onboarding on the TReDS platform from ₹500 crore to ₹250 crore. This measure will bring 22 more CPSEs and 7,000 more companie onto the platform,” she said.
SIDBI has also been asked to open new branches to expand its reach to serve all major MSME clusters within 3 years and provide direct credit to them. It will open 24 additional branches this year.