Key Highlights of Union Budget 2024-25 relating to Banking & Finance and MSME Sector

admin

Key Highlights of Union Budget 2024-25 relating to Banking & Finance and MSME Sector:

  1. Mudra Loans limit increased to Rs 20 Lakhs from Rs 10 Lakhs– The limit of mudra loans will be enhanced to Rs 20 lakh from Rs 10 lakh for those who have availed and successfully repaid loans under TARUN category.
  2. A new Credit Guarantee Scheme for MSMEs for Term Loans without collateral or third party guarantee– A credit guarantee scheme for MSMEs in the manufacturing sector for facilitating term loans for purchasing machinery and equipment, without collateral or third-party guarantee.
  3. A Self-financing Credit Guarantee fund will cover MSME Loans upto Rs 100 crs– Credit Guarantee Scheme on pooling of credit risks of MSMEs as separately constituted — a self-financing guarantee fund will provide to each applicant guarantee covers up to ₹100 crore, while the borrower will have to provide an upfront guarantee fee and an annual guarantee fee.
  4. Government to provide loans up to Rs. 10 lakh at lower rates for higher education– Government to give e-vouchers for loans up to Rs. 10 lakh for higher education in domestic institutions to be given directly to one lakh students each year for annual interest subvention of 3 per cent of loan amount.
  5. Public Sector banks to develop a new credit framework for MSME credit assessment– A new assessment model for MSME credit will enable public sector banks to develop in-house capabilities for evaluating MSMEs instead of depending on external assessments. They will lead the creation of a credit assessment model that scores MSMEs based on their digital footprints. This approach aims to significantly enhance the traditional credit eligibility assessment, which typically relies on asset or turnover criteria, and will also include MSMEs lacking a formal accounting system.
  6. Support to MSMEs during stress and SMA stage to avoid transiting into NPA– A new mechanism to ensure continued bank credit for MSMEs during periods of stress, particularly when they are in special mention accounts (SMA) due to circumstances beyond their control. This support aims to help MSMEs maintain operations and avoid transitioning to non-performing (NP) status.
  7. Turnover threshold for mandatory onboarding on the TREADS platform lowered from ₹500 crore to ₹250 crore– Lowering the turnover threshold for mandatory onboarding on the TREADS platform from ₹500 crore to ₹250 crore. This change will allow an additional 22 Central Public Sector Enterprises (CPSEs) and 7,000 companies to join the platform, and medium enterprises will also be included as suppliers.
  8. SIDBI to expand network within 3 years to extend more credit to MSMEs– SIDBI will establish new branches in MSME clusters to enhance its reach and provide direct credit to these businesses within three years. With the opening of 24 branches this year, service coverage will extend to 168 out of 242 major clusters.