The Budget 2024-25 has proposed a new credit guarantee scheme to facilitate term loans for MSMEs to purchase machinery and equipment without requiring collateral or third-party guarantees.
This scheme will operate by pooling the credit risks of these MSMEs, with a separately constituted self-financing guarantee fund providing each applicant with guarantee coverage of up to ₹100 crore, although the loan amount may be larger.
Industry representatives expect the announced measures, including the enhancement of MUDRA loan limits and the introduction of a new credit guarantee scheme, to incentivize financial entities to lend to small entrepreneurs while ensuring broader financial inclusion and stability.
“The credit guarantee for MSMEs will help them scale up. The creation of clusters and the significant expansion of SIDBI branches will provide a boost and help them grow. The government’s commitment to expanding SIDBI branches to serve MSMEs in clusters is a significant development, as credit availability for MSMEs is a major concern,” said Srivats Ram, Managing Director of Wheels India and Chairman of the CII Tamil Nadu State Council.
Ajay Kumar Srivastava, Managing Director & CEO of Indian Overseas Bank, commented, “Credit guarantee schemes for MSMEs, increasing the limit of Mudra loans to ₹20 lakh for those who have repaid previous loans, creating alternative methods to evaluate MSME loan eligibility, and expanding SIDBI branches are all expected to provide the much-needed access to credit and additional support for further growth of the MSME sector.”
TT Keshav, Co-Convenor of the CII TN CEO Forum and Director of Taylor Rubber Pvt Ltd. praised the Finance Minister’s announcement to reduce the turnover threshold for mandatory onboarding on the TReDS platform from Rs.500 crore to ₹250 crore. “Since they are encouraging more enrollment onto TReDs, the proposed move by the FM is very useful for all MSMEs to get the payment within a short period,” he added.
“A new assessment model for MSME credit will lead to MSMEs getting a better chance to improve their access to credit without formal accounting systems and reduction of turnover threshold to expand the scope of mandatory onboarding onto the TReDS platform will help enhance MSMEs’ ability to convert trade receivables into cash, said Sundeep Mohindru, Promoter & Director, M1xchange, a digital invoice discounting platform with TReDS
S. Rethinavelu, Founder & President of the Agro Food Chamber of Commerce & Industry, commended the focus on MSMEs, particularly labour-intensive manufacturing units, stating that the MSME-specific measures would ensure employment for youth.
The Finance Minister’s proposal to set up E-Commerce Export Hubs under a public-private partnership (PPP) mode, which will enable MSMEs and traditional artisans to sell their products in international markets, was also lauded. Additionally, the plan to establish a new mechanism for facilitating the continuation of bank credit to MSMEs during their stress periods was seen as a positive move.
“The investment allocated for boosting the tourism sector can be leveraged by MSME entrepreneurs to enhance self-employment and revenue generation,” said M K Anand, Strategic Business Advisor – MSMEs & Founder, SEE CHANGE Consulting.
