Finance Minister Nirmala Sitharaman, on Tuesday, introduced a new credit guarantee scheme for Micro, Small, and Medium Enterprises (MSMEs) while presenting the 2024-25 budget. This scheme aims to help MSMEs get term loans by reducing credit risks.
The scheme includes a self-financing guarantee fund that can cover up to Rs 100 crore for each applicant, though the loan amount can be higher. Sitharaman stated, “To help MSMEs get term loans, we will introduce a credit guarantee scheme. This will reduce the credit risks for MSMEs. Each applicant can get a guarantee cover of up to Rs 100 crore.”
This initiative is designed to reduce credit risks and make financing easier for MSMEs. MSMEs had requested a special package to improve access to institutional credit at competitive rates. The industry wanted a package that creates a better balance between banks and MSMEs.
In 2021-22, the MSME sector contributed over 29 percent to the GDP. In 2023-24, MSME product exports rose to 45.56 percent, showing their important role in the country’s exports. Consultancy firm Deloitte suggested promoting credit guarantees and insurance schemes, especially for sectors like automotive, electronics, industrial, and electrical machinery.
Experts also pointed out that only six percent of MSMEs are selling on e-commerce platforms and highlighted the need for digital transformation. The Union Budget 2023-24 allocated Rs 22,137.95 crore for the MSME ministry, a 41.6 percent increase from the previous year.
