Finance Minister Nirmala Sitharaman in Budget 2024-25 raised the limit of Mudra loans from Rs 10 lakh to Rs 20 lakh and introduced a new assessment model for MSME loans.
Sitharaman said that a loan guarantee scheme would be introduced to facilitate term loans for MSMEs to purchase machinery and equipment without collateral or third-party guarantee and the scheme would serve to pool the credit risks of such MSMEs.
“A self-financed guarantee fund set up separately will provide a guarantee cover of up to Rs 100 crore to each applicant. Even if the loan amount is large, the borrower has to pay upfront guarantee fee and annual guarantee fee for reducing loan balance,” he said.
Public sector banks (PSBs) are building their own capacity to rate MSMEs for credit, rather than relying on external ratings, and PSBs will be at the forefront of “developing or developing” a new credit rating, Sitharaman said.
Also, “this is expected to be a significant improvement over the traditional assessment of creditworthiness based only on asset or turnover criteria which covers MSMEs without a proper accounting system,” he said.
