Finance Minister Nirmala Sitharaman in Budget 2024-25 increased the limit of Mudra loans from Rs 10 lakh to Rs 20 lakh and introduced a new assessment model for MSME credit.
Sitharaman said that for facilitating term loans to MSMEs for purchase of machinery and equipment without collateral or third party guarantee, a credit guarantee scheme will be introduced and that the scheme will operate on pooling of credit risks of such MSMEs.
“A separately constituted self financing guarantee fund will provide to each applicant guarantee cover up to 100 crore rupees. While the loan amount may be larger, the borrower will have to provide an upfront guarantee fee and an annual guarantee fee on the reducing loan balance,” she said.
Public sector banks (PSBs) will build their own in-house capability to assess MSMEs for credit instead of relying on external assessment, Sitharaman said, adding that PSBs will also take a lead “in developing, or getting developed”, a new credit assessment model based on the scoring of digital footprints of the MSMEs in the economy.
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“This is expected to be a significant improvement over the traditional assessment of credit eligibility based only on asset or turnover criteria that will also cover MSMEs without a formal accounting system,” she said.
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