In the Budget 2024-25, Finance Minister Nirmala Sitharaman announced an increase in the Mudra loan limit from Rs 10 lakh to Rs 20 lakh. Additionally, a new assessment model for MSME credit was introduced. Sitharaman also mentioned the implementation of a credit guarantee scheme to facilitate term loans for MSMEs to purchase machinery and equipment without the need for collateral or third party guarantee.
This scheme will operate by pooling the credit risks of such MSMEs. Furthermore, a self-financing guarantee fund will be established to provide guarantee cover up to 100 crore rupees to each applicant. Despite the possibility of larger loan amounts, borrowers will be required to pay an upfront guarantee fee and an annual guarantee fee based on the reducing loan balance.
Public sector banks (PSBs) are set to establish their own internal capacity for evaluating MSMEs for credit rather than depending on external evaluation, Sitharaman stated. She also mentioned that PSBs will play a key role in creating or facilitating the creation of a new credit evaluation model based on the analysis of digital footprints of MSMEs in the economy.
This is anticipated to represent a substantial advancement over the conventional method of assessing creditworthiness solely based on asset or turnover standards, and will also encompass MSMEs lacking a formal accounting system,” she stated.