New Credit Guarantee Scheme Announced to Empower MSMEs

Finance Minister Nirmala Sitharaman introduced a credit guarantee scheme prioritizing MSMEs' growth by facilitating machinery purchases without collateral. With provisions for technological and regulatory support, the scheme aims to boost MSMEs' competitiveness globally. Additionally, new assessment models and e-commerce export hubs will further bolster the sector.

Finance Minister Nirmala Sitharaman on Tuesday announced a new credit guarantee scheme aimed at facilitating term loans for MSMEs to purchase machinery and equipment without the need for collateral or third-party guarantees.

In her Budget speech in the Lok Sabha, Sitharaman emphasized special attention to micro, small & medium enterprises (MSMEs) and manufacturing, particularly labour-intensive units. "We've formulated a package covering financing, regulatory changes, and technology support for MSMEs to help them thrive and compete globally," she stated.

The scheme will pool credit risks of MSMEs in manufacturing, with a self-financing guarantee fund providing coverage up to Rs 100 crore. Borrowers will pay upfront and annual guarantee fees. Sitharaman also introduced mechanisms to ensure continued bank credit to MSMEs during periods of stress.

The Finance Minister highlighted the importance of credit availability even when MSMEs are in the 'special mention account' (SMA) category, preventing them from slipping into non-performing asset (NPA) status. Government-backed guarantees will support this credit flow.

(With inputs from agencies.)