Budget 2024: FM Nirmala Sitharaman announces measures to boost MSMEs

Budget 2024: FM Nirmala Sitharaman announces measures to boost MSMEs
Published on: 23 July 2024

Finance Minister Nirmala Sitharaman unveiled initiatives targeted at strengthening the micro, small, and medium enterprise (MSME) sector in her seventh budget speech, which also happened to be the first Union Budget of the new NDA government.

Ms. Sitharaman claimed that MSMEs and labor-intensive manufacturing had received special attention in the budget and that the government had developed a package that would offer MSMEs with technological and financial support to help them thrive.

She declared that a credit guarantee scheme would be implemented to enable term loans for machines without requiring collateral or a third-party guarantee. Each borrower will receive a guarantee cover of up to Rs.100 crore from a separately established self-financing guarantee fund, although the loan amount may be greater. 

New Methodology for Public Sector

Additionally, the budget suggests a new methodology for public sector banks to evaluate MSME financing that does not rely on outside evaluation. According to the Minister, this will not only be based on the assets and turnover criteria that are traditionally utilized, but also on the digital footprint of MSMEs in the economy.

In order to prevent these businesses from entering the non-performing asset (NPA) stage, the Budget also offers credit support to MSMEs during a stressful moment via a new mechanism, while being a special mention account for circumstances beyond their control.

The Mudra loan limit, which is currently set at Rs. 10 lakh, will be increased to Rs. 20 lakh for those who have previously taken out and successfully repaid loans under the Tarun category. 

Furthermore, in order to increase credit availability and expand coverage to 168 clusters, 24 additional SIDBI branches in MSME clusters are scheduled to open within the next three years.

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Additionally, in order to promote trade under one roof, PPP-mode e-commerce export hubs would be established with a smooth regulatory framework to allow MSMEs and traditional craftspeople to succeed in global markets.

The turnover threshold of MSME buyers for mandatory onboarding on TReDs platform (a platform to assist MSMEs) will be reduced by the government from Rs 500 crore to Rs 250 crore.

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