Budget 2024 turned its attention to Micro, Small and Medium Enterprises (MSMEs) in a big way, as Finance Minister Nirmala Sitharaman announced a slew of measures ranging from a credit guarantee scheme to higher limit for MUDRA loans for the sector.
"This Budget provides special attention to MSMEs and manufacturing,
particularly labour-intensive manufacturing. We have formulated a package covering financing, regulatory changes and technology support for MSMEs to help them grow and also compete globally," Sitharaman said.
Here is what the Budget has to offer to MSMEs :
Credit guarantee scheme for MSMEs in manufacturing sector
To facilitate term loans to MSMEs for purchase of machinery and equipment without collateral or third-party guarantee, the government plans to launch a credit guarantee scheme for MSMEs in the manufacturing sector.
"The scheme will operate on pooling of credit risks of such MSMEs. A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to Rs 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," Sitharaman said in her Budget speech.
Follow our live blog for the latest on Budget 2024
New assessment model for MSME credit
A new credit assessment model will be formulated by state-owned banks to assess MSMEs instead of relying on external assessment.
They will also take a lead in developing or getting developed a new credit assessment model, based on the scoring of digital footprints of MSMEs in the economy.
It is expected to be a significant improvement over the traditional assessment of credit eligibility based only on asset or turnover criteria and will also cover MSMEs without a formal accounting system, the minister, presenting her record seventh Budget, said.
Credit Support to MSMEs during stress period
The Budget announced a new mechanism to facilitate continuation of bank credit to MSMEs during their stress period, which pertains to circumstances beyond their reasons.
"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," Sitharaman added.
Mudra Loans
The limit of Mudra loans will be enhanced to Rs 20 lakh from Rs 10 lakh for those entrepreneurs who have availed and successfully repaid previous loans under the ‘Tarun’ category.
Enhanced scope for mandatory onboarding in TReDS
To help MSMEs unlock their working capital by converting their trade receivables into cash, Sitharaman has proposed to reduce the turnover threshold of buyers for mandatory onboarding on the TReDS platform from Rs 500 crore to Rs 250 crore.
The minister said the step will bring 22 more CPSEs and 7,000 more companies onto the platform and medium enterprises will also be included in the scope of the suppliers.
SIDBI branches in MSME clusters
SIDBI will open new branches to serve all major MSME clusters within three years and provide direct credit to them. As many as 24 such branches will be opened this year, enabling the service coverage to expand to 168 out of 242 major clusters.
MSME Units for Food Irradiation, Quality & Safety Testing
The Budget announced financial support to set up 50 multi-product food irradiation units in the MSME sector.
"Setting up of 100 food quality and safety testing labs with NABL accreditation will be facilitated," Sitharaman said.
E-commerce export hubs
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.
This move is expected to making doing business easy for MSMEs by facilitating trade and export related services under one roof.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
