Budget Opens More Avenues of Credit For MSMEs
Chennai: Realising their potential in job creation, the Budget has formulated a package for MSMEs providing credit guarantees, new assessment criteria, and support during times of stress to spur growth and improve their competitiveness.
The government has proposed a Credit Guarantee Scheme for MSMEs in the manufacturing sector, which will facilitate term loans to MSMEs for the purchase of machinery and equipment without collateral or third-party guarantee. The scheme will operate on the pooling of credit risks of such MSMEs. A separately constituted self-financing guarantee fund will provide, to each applicant, a guarantee cover of up to Rs 100 crore. The borrower will have to provide an upfront guarantee fee and an annual guarantee fee on the reduced loan balance.
Further, public sector banks will build their in-house capability to assess MSMEs for credit, instead of relying on external assessment. This will be based on the scoring of digital footprints of MSMEs in the economy unlike the traditional assessment of credit eligibility based only on asset or turnover.
Banks will continue to provide credit to MSMEs during their stress period. To avoid getting into the NPA stage, credit availability will be supported through a guarantee from a government-promoted fund.
The limit of Mudra loans will be enhanced to Rs 20 lakh from the current Rs 10 lakh for those entrepreneurs who have availed and successfully repaid previous loans under the ‘Tarun’ category. Taking credit closer to MSMEs, SIDBI will open new branches in all major MSME clusters within 3 years. With the opening of 24 such branches this year, the service coverage will expand to 168 out of 242 major clusters.
Further, the turnover threshold of buyers for mandatory onboarding on the TReDS platform has been reduced from Rs 500 crore to Rs 250 crore and this will bring 22 more CPSEs and 7000 more companies onto the platform. Medium enterprises will also be included in the scope of the suppliers.
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.
The government will also provide financial support for setting up 50 multi-product food irradiation units in the MSME sector.