MSME Sector Top 7 Highlights - Credit Guarantee, Increased Mudra Loans & More in Budget 2024
For the fiscal year 2024-25, Nirmala Sitharaman presented the Union Budget on July 23rd. A strong emphasis was placed on supporting Micro, Small, and Medium Enterprises (MSMEs) in the budget. Here are the key takeaways
1. Collateral-Free Loans:
Collateral-free loans for machinery and equipment have been a game-changer for MSMEs in the manufacturing sector.
2. Risk-Sharing Mechanism
The scheme also establishes a self-financing guarantee fund, which pools credit risks to cover up to 100 crores per applicant. Borrowers pay minimal upfront and annual fees based on their reducing loan balances, lowering the cost of credit.
3. Digital Footprint-Based Assessment
An entirely new approach to credit evaluation is the adoption of digital footprints. As public banks move away from traditional asset-based methods, they will develop in-house capabilities for assessing MSME creditworthiness. MSMEs lacking formal accounting systems will benefit from this approach.
4. Increased Mudra Loan Limits
Businessmen with a proven track record of successful loan repayments can now access larger funding for business expansion. The Mudra loan limit under the "Tarun" category has been raised from ₹10 lakh to ₹20 lakh.
5. Boosting Food Processing
Financial support will be provided for the establishment of 50 multi-product food irradiation units and 100 NABL-accredited food quality testing laboratories. MSME units involved in food processing will benefit from this initiative by improving food safety standards.
Credit Guarantee For Stressed MSME
As recognition of the challenges faced by MSMEs during financial hardships, the budget proposes a new mechanism to ensure continued access to credit for those categorized as "special mention accounts" (SMA) because of unforeseen circumstances. By offering businesses this government-backed guarantee, they will be able to keep running and avoid becoming non-performing assets (NPAs).
Expansion of TReDS Platform
By lowering the mandatory onboarding turnover threshold for TReDS from 500 crore to 250 crore, the budget allows 22 Central Public Sector Enterprises (CPSEs) and 7,000 companies to participate. In addition, medium businesses will be able to participate as suppliers, which will allow them to unlock more working capital through trade receivable discounts.
E-commerce Export Hubs
Via Public-Private Partnership (PPP) The government plans to create e-commerce export hubs that will provide trade and export-related services under one roof, making it easier for MSMEs and artisans to sell abroad.
By introducing innovative credit solutions, digital-based assessments, and financial stress support for MSMEs, Budget 2024 builds on this strong foundation. The budget aims to strengthen MSMEs' ability to contribute to India's economic growth and export potential by enhancing market access, infrastructure development, and food safety standards.
