Budget 2024: FM Extends Credit Support for MSMEs

The Finance Minister Nirmala Sitharaman said that the limit of MUDRA loans will be increased to Rs 20 lakh from the current Rs 10 lakh for those who have availed and successfully repaid loans under the TARUN category

Outlook Business Desk

Updated on: 23 July 2024 12:05 pm

In the Union Budget 2024, Finance Minister Nirmala Sitharaman announced a new credit guarantee program for MSMEs to enable the growth of medium, small, and micro enterprises. The scheme will allow MSMEs to access credit without collateral or any third-party guarantees.

On credit guarantee schemes for MSMEs in manufacturing, FM said, "To facilitate term loans for MSMEs for the purchase of machinery and equipment without collateral and guarantee, a new scheme will be introduced. This guarantee fund will provide guarantees of up to Rs 100 crore."

The Finance Minister said that the limit of MUDRA loans will be increased to Rs 20 lakh from the current Rs 10 lakh for those who have availed and successfully repaid loans under the TARUN category. The MSME sector was one of the hardest hit by the COVID pandemic and such state-backed loans would make banks more comfortable in lending to them, the FM said.

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Public sector banks will take the lead in developing credit assessment models for MSMEs. Small Industries Development Bank of India (SIDBI) will open new branches to serve more MSMEs over a period of three years. The apex regulatory body will set up 25 new branches in FY25.

In addition, Sitharaman announced that e-commerce export hubs will be developed to promote international trade of MSMEs through public-private partnerships.

“MSMEs consume approximately 50 per cent of nation's power needs and generate over 75 per cent of GHG emissions. While the budget has committed support to MSMEs to grow and compete globally, additional support is required for the greening of the MSME sector, including easier access to climate financing,” said Sameer Jain, Managing Director at Primus Partners.

“It will be interesting to see the details of the provisions for uses of Credit Guarantee Schemes especially for Green projects,” he added.

The Finance Minister also announced that the government will also focus on increasing women's participation in the workforce, by setting up hostels and creating partnerships to organize women-specific skilling programs.