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Source- This post on the Credit Guarantee Scheme for MSMEs has been created based on the article “Budget’s big MSME push: New credit rating mechanism for smaller units; Mudra loan limit hiked” published in “Indian Express” on 24 July 2024.
Why in the news?
Finance Minister Nirmala Sitharaman recently unveiled several key measures aimed at boosting Micro, Small, and Medium Enterprises (MSMEs).
About Credit Guarantee Scheme for Machinery
1. A new credit guarantee scheme for purchasing machinery and equipment without collateral or third-party guarantees has been introduced.
2. The scheme will pool credit risks of MSMEs, providing a guarantee cover of up to Rs 100 crore per applicant through a self-financing guarantee fund.
3. Borrowers will need to pay an upfront guaranteed fee and an annual fee based on the reducing loan balance.
Measures to boost Micro, Small, and Medium Enterprises
1. Public Sector Banks (PSBs) will now assess credit eligibility for MSMEs themselves and this will eliminate the need for external assessments.
2. The new model will rely on the digital footprints of MSMEs, providing a significant improvement over traditional methods based on asset or turnover criteria.
3. This model will also cover MSMEs without formal accounting systems, broadening the scope of eligible enterprises.
4. The limit for Mudra loans under the PM Mudra Yojana has been increased from Rs 10 lakh to Rs 20 lakh for entrepreneurs who have successfully repaid previous loans under the ‘Tarun’ category.
UPSC Syllabus: Indian Economy
