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Union Budget 2024 brings in a boost for MSMEs with new credit and growth, With an aim to bolster the growth and global competitiveness of Micro, Small, and Medium Enterprises (MSMEs), the Union Budget 2024 has introduced a comprehensive package that includes refinancing, regulatory changes, and technological support.
The Finance Minister Nirmala Sitharaman outlined initiatives to address the challenges faced by MSMEs.
Credit Guarantee Scheme for Machinery and Equipment
A new Credit Guarantee Scheme will be launched to facilitate the purchase of machinery and equipment by MSMEs without requiring collateral or third-party guarantees. This scheme will pool the credit risks of participating MSMEs, providing a robust support system for these enterprises.
Self-Financing Guarantee Fund
The newly constituted Self-Financing Guarantee Fund will offer each applicant a guarantee cover of up to INR 100 crore, regardless of the loan amount. Borrowers will need to pay an upfront guarantee fee and an annual guarantee fee based on the reduced loan balance.
New Assessment Model for MSME Credit
Public sector banks will develop in-house capabilities to assess MSMEs for credit, moving away from reliance on external assessments. This new model will focus on the digital footprints of MSMEs, providing a more comprehensive evaluation of their credit eligibility.
Continued Bank Credit During Stress Periods
A new mechanism will be introduced to facilitate the continuation of bank credit to MSMEs during their stress periods, even when they are in the Special Mention Account (SMA) stage due to reasons beyond their control. This measure aims to prevent MSMEs from becoming Non-Performing Assets (NPAs) by ensuring continued credit availability, supported by a government-promoted fund.
Mudra Loans and TReDS Onboarding
The limit for Mudra loans under the Tarun category will be doubled from INR 10 lakh to INR 20 lakh for entrepreneurs who have successfully repaid previous loans. Additionally, the turnover threshold for mandatory onboarding on the Trade Receivables Discounting System (TReDS) platform will be reduced from INR 500 crore to INR 250 crore, bringing 22 more Central Public Sector Enterprises (CPSEs) and 7,000 more companies onto the platform.
SIDBI Branch Expansion and Food Quality Testing Labs
SIDBI will open new branches in MSME clusters to expand its reach and provide direct credit. The service coverage will increase to 168 out of 242 major clusters with the opening of 24 new branches this year. Additionally, the government will facilitate the establishment of 100 food quality and safety testing labs with NABL accreditation for MSME units.
E-Commerce Export Hubs and Industrial Parks
To help MSMEs and traditional artisans access international markets, e-commerce export hubs will be set up in public-private partnership mode. These hubs will offer a seamless regulatory and logistic framework for trade and export-related services. Furthermore, the government will facilitate the development of investment-ready, plug-and-play industrial parks in or near 100 cities in partnership with states and the private sector.
Internship Opportunities for Youth
As part of the Prime Minister's package, a comprehensive internship scheme will be launched, providing opportunities in 500 top companies to 1 crore youth over five years. Interns will gain exposure to real-life business environments and various professions, receiving an allowance of INR 5,000 per month and a one-time assistance of INR 6,000. Companies will cover the training costs and 10% of the internship costs from their CSR funds.