Budget 2024: Mudra Loans Limit Raised To Rs 20 Lakh From Rs 10 Lakh, New Credit Assessment Model For MSME
Government will introduce credit guarantee scheme for MSMEs in manufacturing along with a new mechanism for continuation of bank credit to MSMEs during stressed periods, the Finance Minister said.
The government, as part of the Union Budget, has enhanced the limit for Mudra loans to Rs 20 lakh.
Union Finance Minister Nirmala Sitharaman said that the Mudra loans' limit will be enhanced to Rs 20 lakh from current Rs 10 lakh "for those who've paid previous loans under Tarun category."
She also said that the government will introduce credit guarantee scheme for MSMEs in manufacturing along with a new mechanism for continuation of bank credit to MSMEs during "stressed periods" through a government promoted fund.
"The new credit assessment model (to be introduced) based on the scoring of digital footprints of the MSME in the economy," she said, adding that this will be a "significant improvement" over the traditional assessment of credit facility based only on asset or turnover criteria. This will also cover MSME without a formal accounting system.
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Sitharaman noted that the a new mechanism will be introduced to facilitate continuation of bank credit to MSMEs during their stress period while being in special mention account or SMA.
While being in the SMA stage for reasons beyond their control, MSMEs need credit to continue their business to avoid getting into the NPA (non-performing asset) stage, she said.
The MSME sector in India is estimated to have a significant funding shortage of Rs 20-25 lakh crore, according to CRISIL. "Banks account for 75% of lending to this segment. Public sector banks will do well to set up in-house, technology-driven underwriting capacity to serve new borrowers and bring them into the formal credit fold."
