“We have set a target of additional MSME lending of ₹1.54 lakh crore in FY25, beyond their estimated ₹4.21 lakh crore to be lent this year with just a business-as-usual approach,” Sitharaman said at the 11th SBI Banking & Economics Conclave.
This comes after the Finance Minister in the July Union Budget this year announced a credit guarantee scheme for Medium, Small and Micro Enterprises (MSMEs) to facilitate term loans without collateral or a third-party guarantee.
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This enhanced lending is part of a sustained effort to bolster MSME credit flow over the next two years. “Banks should target lending ₹1.54 lakh crore more this year than the business-as-usual limit of ₹4.21 lakh crore,” she added.
Looking ahead, Sitharaman said the growth in lending should continue. “For FY26, banks should target lending ₹6.12 lakh crore to MSMEs, and for FY27, this target should increase to ₹7 lakh crore,” she said.
“We have formulated a package covering financing, regulatory changes and technology support for MSMEs to help them grow and also compete globally, as mentioned in the interim budget,” she said.
The credit guarantee scheme for MSMEs in manufacturing will operate by pooling the credit risks of such entities. “A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to ₹100 crore, while the loan amount may be larger,” the minister announced in the Budget.
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In her Budget speech in the Lok Sabha in July, she said the Budget provides special attention to micro, small & medium enterprises (MSMEs) and manufacturing, particularly labour-intensive units “to help them grow and also compete globally, as mentioned in the interim budget.” She said the credit guarantee scheme for MSMEs in manufacturing will operate on the pooling of credit risks of such entities.
“A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to ₹100 crore, while the loan amount may be larger,” the minister announced in the Budget. The borrower must provide upfront and annual guarantee fees on the reduced loan balance.
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She also announced a new mechanism for facilitating the continuation of bank credit to MSMEs during their stress period. Sitharaman said that while being in the ‘special mention account’ (SMA) stage for reasons beyond their control, MSMEs need credit to continue their business and avoid getting into the NPA stage.
First Published: Nov 18, 2024 10:09 PM IST
