Budget 2024: A Boon for MSMEs?
The Micro, Small, and Medium Enterprises (MSMEs) received significant focus in the recent budget, with the Finance Minister outlining a series of measures to boost credit access, streamline financing processes, and expand market opportunities. Let's delve into the key announcements:
1. Collateral-Free Credit for Machinery Purchase:
A brand new credit guarantee scheme specifically targets MSMEs in the manufacturing sector. This scheme will facilitate term loans for purchasing machinery and equipment without requiring collateral or third-party guarantees. This significantly reduces the barrier to entry for MSMEs seeking to invest in growth and modernization.
2. Revamped Credit Assessment for MSMEs:
Public Sector Banks (PSBs) will develop a new, in-house credit assessment model for MSMEs. This model will leverage digital footprints and go beyond traditional criteria like asset or turnover, making it easier for MSMEs without formal accounting systems to secure loans.
3. Support During Stressful Periods:
A government-promoted fund will be established to provide credit guarantees to MSMEs facing temporary financial difficulties. This crucial support will help businesses navigate the "special mention account" (SMA) stages and avoid slipping into Non-Performing Assets (NPA) status.
4. Increased Mudra Loan Limits:
Entrepreneurs who have successfully repaid previous loans under the Mudra scheme's "Tarun" category will now be eligible for increased loan amounts – up to ₹20 lakh from the existing ₹10 lakh limit. This provides financial resources for scaling existing businesses.
5. Expanding Reach of the TReDS platform:
To help MSMEs unlock working capital stuck in receivables, the mandatory onboarding threshold for buyers on the Trade Receivables Electronic Discounting System (TReDS) platform has been halved from ₹500 crore to ₹250 crore. This will bring more large companies onto the platform, offering MSMEs faster access to cash.
6. Enhanced Access to Credit Through SIDBI:
Small Industries Development Bank of India (SIDBI) plans to open new branches in all major MSME clusters within the next three years. This will provide MSMEs with direct access to credit and financial services.
7. Boosting Food Processing Sector:
The budget proposes financial support for establishing 50 multi-product food irradiation units and 100 NABL-accredited food quality and safety testing labs in the MSME sector. This investment will enhance food safety standards and processing capabilities.
8. E-commerce Export Hubs for MSMEs:
The government plans to establish E-commerce Export Hubs with the private sector. These hubs will provide MSMEs and traditional artisans a platform to connect with international markets under a streamlined regulatory and logistical framework.
Overall Impact:
The budget measures hold significant promise for MSMEs. Easier access to credit, improved financing processes, and expanded market opportunities can act as catalysts for growth and job creation in the MSME sector. The focus on innovation, like the digital footprint-based credit assessment model, reflects a forward-looking approach to supporting this vital segment of the Indian economy.
