MSME MUDRA Loan Boost in Budget 2024: Key Highlights and New Schemes
Finance Minister Nirmala Sitharaman, in her Budget 2024-25 speech, has announced significant measures to bolster the Micro, Small, and Medium Enterprises (MSMEs) sector, including an increase in the limit for MSME MUDRA loans and the introduction of a new credit guarantee scheme.
Key Highlights
Increase in MUDRA Loan Limit and Credit Guarantee Scheme
Finance Minister Nirmala Sitharaman, in her Budget 2024-25 speech, announced an increase in the limit for MUDRA loans from Rs 10 lakh to Rs 20 lakh. The limit has been raised for those who have availed the loans before and successfully repaid them. This increase aims to provide substantial relief to MSMEs, enabling them to expand their operations and invest in new machinery and equipment.
Guarantee Cover and Assessment Model
A self-financing guarantee fund will be introduced, providing a guarantee cover of up to Rs 100 crore per applicant. Public sector banks (PSBs) will develop in-house capabilities to assess MSMEs for credit, reducing reliance on external assessments. This move aims to improve credit access and foster growth in the MSME sector, which is crucial for India’s economic development.
Comprehensive Support for MSMEs
The Budget provides comprehensive support to the MSME sector, including a credit guarantee scheme and financial support for technology adoption. A new arrangement will facilitate the continuation of bank credit to borrowers during their period of stress. Additionally, the government will establish e-commerce hubs under the PPP model to help MSMEs and traditional artisans access international markets.
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Detailed Analysis
Enhanced MUDRA Loan Limits
The MUDRA loan limit has been doubled from Rs 10 lakh to Rs 20 lakh for those who have previously availed and successfully repaid the loans. This move is expected to provide substantial relief to MSMEs, enabling them to expand their operations and invest in new machinery and equipment.
Credit Guarantee Scheme for MSMEs
A new credit guarantee scheme will be introduced to facilitate term loans for MSMEs without collateral. The scheme will operate on pooling the credit risks of such enterprises, providing a guarantee cover up to Rs 100 crore per applicant. This initiative aims to reduce the credit risk and enhance access to financing for MSMEs, which play a crucial role in India’s economic growth.
New Credit Assessment Model
Public sector banksMSME MUDRA loan will develop in-house capabilities to assess MSMEs for credit instead of relying on external assessments. This will involve developing a new credit assessment model based on the digital footprints of MSMEs, which is expected to be a significant improvement over traditional methods. The new model will cover MSMEs without a formal accounting system, broadening access to credit for smaller enterprises.
Additional Support Measures
The Budget also includes several other support measures for MSMEs:
- Financial support for 50 multi-product food irradiation units.
- Establishment of e-commerce hubs in PPP mode to facilitate international market access for MSMEs and traditional artisans.
- A package to finance technology support for MSMEs.
- A new arrangement to facilitate the continuation of bank credit to borrowers during their period of stress.
Conclusion
The Union Budget 2024-25 presents a comprehensive package to support the MSME sector, including enhanced MUDRA loan limits, a new credit guarantee scheme, and the development of a new credit assessment model. These measures are expected to provide a significant boost to the MSME sector, enabling it to play a pivotal role in India’s economic growth.
