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Budget 2024 Key announcements related to MSME & Startups

Engine of Growth in India -MSME

Budget 2024 Key announcements related to MSME & Startups

MSMEs are finding relief following Finance Minister Nirmala Sitharaman’s budget announcements, which are expected to significantly boost these vital businesses. Overall, the budget introduces a transformational package aimed at revitalizing the MSME sector, with significant emphasis on financial support, technological upgrades, and regulatory changes to enhance growth and innovation. key announcements related to Micro, Small and Medium Enterprises and startups from the Union Budget 2024:

For MSMEs (Micro, Small and Medium Enterprises):

Credit Availability and Support to Micro, Small and Medium Enterprises:

  • New Credit Guarantee Scheme: A scheme for Micro, Small and Medium Enterprises in the manufacturing sector, allowing term loans for machinery and equipment without collateral or third-party guarantees. This includes a self-financing guarantee fund providing cover up to INR 100 crore per applicant. Provides coverage up to Rs 100 crore per applicant, with borrowers paying an upfront and annual guarantee fee based on the reducing loan balance.
  • Mudra Loans Limit Enhancement: The limit for Mudra loans has been increased from INR 10 lakh to INR 20 lakh for entrepreneurs who have successfully repaid previous loans under the ‘Tarun’ category. Increased from Rs 10 lakh to Rs 20 lakh for entrepreneurs who have successfully repaid previous loans under the ‘Tarun’ category.
  • Continuation of Bank Credit: A new mechanism to facilitate the continuation of bank credit to Micro, Small and Medium Enterprises during their stress period, supported by a government-promoted fund.
  • New Credit Assessment Model: Public sector banks will develop a new credit assessment model for Micro, Small and Medium Enterprises based on their digital footprints instead of traditional asset or turnover criteria.

Financial Support and Infrastructure to Micro, Small and Medium Enterprises:

  • Food Irradiation Units and Testing Labs: Financial support for setting up 50 multi-product food irradiation units and 100 food quality and safety testing labs with National Accreditation Board for Testing and Calibration Laboratories accreditation in the Micro, Small and Medium Enterprises sector.
  • Expansion of SIDBI Branches: Small Industries Development Bank of India branches will be expanded to serve all major Micro, Small and Medium Enterprises clusters, with 24 new branches opening this year, extending coverage to 168 out of 242 major clusters providing better access to financial services and bridging the gap between MSMEs and financial institutions.
  • E-Commerce and Export Facilitation: Establishment of these hubs will aid MSMEs in selling products internationally, providing comprehensive trade and export-related services. Establishment of E-Commerce Export Hubs in PPP mode to enable Micro, Small and Medium Enterprises and traditional artisans to sell their products in international markets, providing trade and export-related services under one roof. Reduction of the turnover threshold for mandatory onboarding on the TReDS platform from INR 500 crore to INR 250 crore, bringing more CPSEs and companies onto the platform, and including medium enterprises as suppliers. Reduced from Rs 500 crore to Rs 250 crore, expanding the platform’s reach to approximately 22 Central Public Sector Enterprises and around 7,000 additional companies, including medium enterprises.

For Startups:

  • Internship Opportunities: A comprehensive scheme to provide internship opportunities in 500 top companies to 1 crore youth over 5 years, offering an internship allowance of INR 5000 per month and a one-time assistance of INR 6000. Companies will cover training costs and 10% of the internship cost from their CSR funds.
  • Industrial and Urban Development: Development of “plug and play” industrial parks with complete infrastructure in or near 100 cities in partnership with states and the private sector. Establishment of 12 new industrial parks under the National Industrial Corridor Development Programme.
  • Digital Public Infrastructure: Development of Digital Public Infrastructure applications at population scale in areas like credit, e-commerce, education, health, law and justice, logistics, Micro, Small and Medium Enterprises services delivery, and urban governance, promoting productivity gains, business opportunities, and private sector innovation.

Supreme Court Decision for Revival & Rehabilitation of MSME:

In the case of Pro Knits Vs. The Board of Directors of Canara Bank and Ors., the Honorable Supreme Court set aside the decision of the Bombay High Court and held that:

  • The instructions for the Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises as notified by the Central Govt on 29.05.2015 have statutory force and are binding on all Scheduled Commercial Banks licensed to operate in India by the Reserve Bank of India.
  • The enforcement of security interest under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act can be initiated only when the borrower defaults in repayment of secured debt or any installment thereof, and the account is classified by the secured creditor as non-performing asset, as per Section 13(2) of the said Act.
  • Banking companies though may be ‘secured creditors,’ must follow the aforementioned framework before classifying the loan account of Micro, Small and Medium Enterprises as non-performing asset.

Expert Opinions on Budget 2024 Key announcements related to MSME & Startups

  • Praised the govt’s responsiveness, highlighting the comprehensive financial, regulatory, and technological support for MSMEs. (Vinod Kumar, President of India SME Forum)
  • Emphasized the budget’s potential to catalyze growth and innovation across various sectors, including MSMEs and startups. (Mukul Goyal, Co-founder of Stratefix Consulting)
  • Noted that lowering the TReDS threshold enhances liquidity for MSMEs, aiding their growth and improving supply chain relationships. (Kalyan Basu, MD & CEO of Vayana (IFSC) Pvt Ltd)
  • Highlighted that banks and NBFCs are now more inclined to offer collateral-free working capital at competitive rates through TReDS.( Sundeep Mohindru, Promoter and Director of M1xchange)
  • Stressed that financial support for MSMEs to modernize and adopt new technologies is essential for enhancing competitiveness. ( Govind Sankaranarayanan, Co-Founder and COO at Ecofy)
  • Praised the new credit assessment models based on digital footprints as a forward-thinking approach to credit assessment. ( Hardika Shah, Founder & CEO of Kinara Capital)
  • Expressed concern that micro-scale enterprises, which generate most non-agri jobs, lacked specific programs in the budget. He suggested simplifying credit guarantee schemes for micro loans (Sanjay Sharma, MD & CEO of Aye Finance)

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