Budget 2024-25 Industry: MSMEs to get easy & timely credit
Vijay C Roy
New Delhi, July 23
In her seventh consecutive Budget, Finance Minister Nirmala Sitharaman has put the spotlight on key issues facing the MSME sector in securing timely credit. The move will help the micro, small and medium enterprises in key clusters in states like Maharashtra, Karnataka, Tamil Nadu, Uttar Pradesh, Gujarat, Punjab and Haryana.
The government has proposed a new scheme under the credit guarantee plan for the MSMEs in manufacturing, providing the units with collateral-free term loans for buying machinery and equipment. A separately constituted self-financing guarantee fund will provide cover up to Rs 100 crore to each applicant. The borrower will have to provide an upfront guarantee fee and annual charges on the reducing loan balance.
New scheme under the creditguarantee plan for MSMEs
100 food quality and safety testing laboratories to come up
e-commerce export hubs will be set up to boost international trade
To further strengthen the financial stability of the MSMEs, the limit for Mudra loans has been increased from Rs 10 lakh to Rs 20 lakh. Additionally, e-commerce export hubs will be set up to boost international trade. The Budget has been extremely positive in recognising the role being played by the MSMEs in India’s present and future.
New assessment model
Public sector banks will build their in-house capability to assess the MSMEs for credit, instead of relying on external assessment. They will also take a lead in developing or getting developed a new credit assessment model, based on “scoring of digital footprints” of the 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.
Govt-promoted fund
The FM announced a new mechanism for facilitating continuation of bank credit to the 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 NPA stage. Credit availability will be supported through a guarantee from a government-promoted fund.
SIDBI branches in clusters
SIDBI will open new branches to expand its reach to serve all major MSME clusters within three years, and provide direct credit to them. With the opening of 24 such branches this year, the service coverage will expand to 168 of the 242 major clusters.
Units for food irradiation
Financial support for setting up of 50 multi-product food irradiation units in the MSME sector will be provided. Setting up of 100 food quality and safety testing labs with NABL accreditation will be facilitated.
Trade, export-related services
To enable the 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.
Reacting to the announcements, LVLN Murty, MD & CEO, Dvara KGFS, said: “The Budget has acknowledged the need to support the MSMEs and improve skill training, especially among the rural population.”
He said, “Significant focus has been given to the agricultural sector with the implementation of the Digital Public Infrastructure… This move will pave the way for fintechs and agricultural fintechs chipping in to support farmers with better financial offerings.”
“We welcome the government’s initiative to introduce a new mechanism for the MSMEs to continue seeking bank credit during stress period to ensure smooth functioning. The focus on the sector will result in a positive incentive for the rural parts of the country, thereby, increasing the rural GDP,” he further said.
