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The Indian government has introduced a new credit guarantee scheme aimed at bolstering the manufacturing sector by providing financial support to Medium, Small, and Micro Enterprises (MSMEs).
As part of the Union Budget 2024-25, Finance Minister Nirmala Sitharaman announced the scheme, which will enable MSMEs to acquire machinery and equipment without the need for collateral. The government will establish a self-financing guarantee fund to underwrite credit risks for these businesses.
Under this scheme, MSMEs can avail of a guarantee cover of up to ₹1 billion, while the loan amount can exceed this limit. However, borrowers will be required to pay an upfront guarantee fee and an annual fee on the outstanding loan balance.
The government’s decision to prioritize MSMEs stems from their crucial role in job creation, entrepreneurship, and overall economic growth. By reducing financial hurdles, the credit guarantee scheme is expected to empower MSMEs to expand their operations and contribute significantly to India’s manufacturing prowess.
Furthermore, the government has pledged continued support to stressed MSMEs through a government-backed guarantee fund, ensuring access to credit and preventing them from slipping into the non-performing asset (NPA) category.
To further encourage entrepreneurship, the limit for Micro Units Development and Refinance Agency (MUDRA) loans has been doubled to ₹2 million for borrowers with a clean repayment history.
These measures underscore the government’s commitment to fostering a conducive business environment for MSMEs and driving the nation’s industrial growth.
