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MSME Budget 2024: Raised loan limits, credit guarantees | Key annoucements
Finance minister said measures related to the MSME's are aimed to ease financing, regulatory compliance and enable technology support.
From increasing the limit of MUDRA loans from 10 lakh to 20 lakh to new food irradiation parks, Union Finance minister Nirmala Sitharaman announced several measures for the Micro, Small and Medium Enterprises (MSME) sector.
The finance minister said that the measures related to the MSME's are aimed to ease financing, ease regulatory compliance and enable technology support. These measures, she said, will enable these industries to grow and compete globally.
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Among key announcements is the increase in TARUN category of MUDRA loans from the current limit of ₹10 lakhs to 20 lakhs. This will be available for those entrepreneurs who have availed and successfully repaid the entire loan under TARUN category.
The finance minister also said that a credit guarantee scheme will be introduced for manufacturing MSME's to provide term loans without collateral, or third party guarantees for their purchases. A self-financing guarantee fund, formed by pooling the credit risk of companies, will provide guaranteed cover up to ₹100 crore for each applicant, though the loan amount might be higher. The borrower will have to pay an upfront guarantee fee and an annual guarantee fee for the reduced loan amount.
Public sector banks will take lead to develop their own credit assessment of the borrower. This will be based on the borrower's digital footprint rather than the traditional method based on asset and turnover. This new mechanism will also cover MSME's who do not have a formal accounting system.
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To enhance credit support to stressed MSME units in the Special Mention Account (SMA) stage, the government will ensure credit availability through a credit guarantee from a government supported fund. This will be available to MSME units under financial distress for reasons “beyond their control”. Sitharaman said this aims to prevent these units from becoming Non-Performing Assets (NPA)'s.
The government also reduced the turnover threshold for buyers from ₹500 crore to ₹250 crore to join the TReDS platform. This will facilitate 22 more PSU's and 7000 more companies to join TReDS. Medium enterprises will also be included in the scope of suppliers, and this will unlock more working capital by converting their trade receivables into cash.
According to the RBI, TReDS is an electronic platform for facilitating the financing / discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs) through multiple financiers. These receivables can be due from corporates and other buyers, including Government Departments and Public Sector Undertakings (PSUs).
New branches of Small Industries Development Bank of India (SIDBI) will be set up in next three years to provide direct credit support. Twenty-four such branches will be opened this year, expanding their services to 168 out of 242 major MSME clusters.
Sitharaman also said the government will set up new food irradiation, quality and safety testing units under MSME category. Financial support for setting up 50 multi product food irradiation units will be provided and formation of 100 NABL accredited labs will be facilitated.
To help MSME's to reach new markets, the government announced the formation of e-commerce export hubs in Public-Private-Partnership (PPP) mode. These hubs will facilitate trade & export related services under one roof to enable MSME’s and traditional artisans to sell their products to international markets.
Sitharaman said that manufacturing and services are one of the nine priority areas of the NDA government with special attention on labour intensive manufacturing industries.
