MSME Budget 2024: Schemes introduced

A month has passed since the unveiling of the 2024 Union Budget, which introduced several transformative schemes aimed at supporting MSMEs. The 2024 Budget had bought a wave of optimism and potential for Micro, Small and Medium Enterprises (MSMEs) across the nation.

Recognizing the critical role MSMEs play in driving economic growth, employment and innovation, the Government has introduced a series of progressive schemes designed to empower this sector. From enhanced credit facilities and tax reliefs to digital transformation initiatives and skill development programs, the budget aims to create a robust ecosystem where MSMEs can thrive and contribute significantly to the economy.

This blog delves into the key schemes announced in the budget and how they promise to unlock new opportunities for growth, fostering a resilient and dynamic MSME sector.

Seven key announcements for MSMES in budget 2024

1. Credit guarantee scheme for machinery and equipment : This scheme has a term loan offer for purchasing machinery and equipment with no collateral or any third-party guarantees. Coverage up to Rs.100cr per applicant, with borrowers paying annual guarantee fees.

• Possible Impact : After the announcement of the scheme, MSMEs are still in dilemma on whether the loan is given to groups or individuals. Here group means pooling of credit risk of a cluster and the guarantee of 100cr will be given. The guarantee fee is to be given upfront and every year, hence according to MSMEs view the implementation seems a little difficult.

2. New credit assessment model : In house capabilities to assess MSMEs based on their digital footprints will be developed by public sector banks and not having turnover-based criteria, which will help MSMEs to get assessed without maximum financial documentations.

• Possible Impact : This assessment model seems to be a relief to MSMEs. Basis to their digital footprint they will be accessed and not by the financials, the financials is seen and shared to either NBFC, Banks, non-NBFC for credit and in return they will charge with larger interest rate for credit resulting in higher risk and low profitability. MSME will have an opportunity to get accessed not by the traditional method but by the digital footprint for which the banks are in talks on developing the capabilities to access in-house.

3. Mudra loan limit increased : The Mudra loan limit has increased from Rs 10 Lakhs to 20 lakhs for those who have repaid previous loans, wherein a continued support to be provided to the MSMEs during their critical period, which is backed by a Government promoted fund.

• Possible impact : The Government promoted fund will help the MSMEs not to be an NPA and maintain the account regularly. So, during the stress period the MSMEs can channelize on the growth and not on the debt, in which MSME will have a helping hand.

4. TReDS platform expansion : The turnover threshold for mandatory boarding on the TReDS platform is lowered from Rs 500 crore to Rs 250 crore, and by adding 22 Central Public Sector Enterprises and 7,000 companies will allow MSMEs to participate as suppliers releasing more working capital through trade receivables discounting.

• Possible impact : The MSMEs to participate as suppliers which will help in releasing more working capital through trade receivables discounting. The turnover threshold has been lowered resulting in more MSMEs able to discount in the platform, also the ask from few MSMEs is there should be a campaign set up to register MSMEs to TReDS platform.

5. More SIDBI branches in MSME clusters : Small Industries Development Bank of India (SIDBI) will establish new branches to serve all major MSME clusters and enhance direct credit access. With 24 new branches opening this year, service coverage will expand to 168 out of 242 major clusters. The Government will help MSMEs to get term loans for purchase of machinery and equipment without having to submit any collateral or guarantee.

• Possible impact : SIDBI is the apex of all the institutes for MSME, wherein SIDBI helps MSME to progress by taking all the financial and development needs hence coverage has been asked to expand from 168 out of 242 major clusters. Wherein they will be able to play a key role in direct lending and refinancing.

6. Food irradiation units and testing labs : Additionally, 50 irradiations units and 100 NABL (The National Accreditation Board for Testing and Calibration Laboratories) accredited food quality and safety testing labs will be provided with financial support, providing a boost to MSME units involved in food processing.

• Possible impact : As per data available with FSSAI, till 5 May, the regulator had 206 NABL accredited labs as primary food testing labs that are responsible for carrying out analysis of food samples collected under the Food Safety and Standards Act, 2006. The Government has invited expression of interest (EoI) from the entrepreneurs for setting up multi product food irradiation units under integrated cold chain and value addition infrastructure or cold scheme. The last date for submission of EoI for proposals under the cold chain scheme, a component central scheme – Pradhan Mantri Kisan SAMPADA Yojana, is September 21, resulting in assured quality of food with an uptake in business.

7. E-commerce export hubs : The Government will set up E-commerce export hubs to facilitate access to international markets. These hubs will operate under a seamless regulatory and logistical framework, offering trade and export-related services to MSMEs and traditional artisans.

• Possible impact : The hubs will have a public- private partnership arrangement. The Government announced the setup of hubs to promote exports through the e-commerce medium in a public-private-partnership (PPP)mode. Initially,10-15 hubs will be established basis to the response it will be scaled.