Executive Summary:
This document outlines the Indian government's initiatives to improve credit access for Micro, Small, and Medium Enterprises (MSMEs). Key measures include increased credit guarantee coverage, customized credit cards, priority sector lending guidelines, and a subsidy scheme for SC/ST MSME unit holders. The increased credit guarantee cover for Micro and Small Enterprises has been in effect since April 1, 2025.
Key Points / Main Content:
Credit Enhancement Policies:
* Credit guarantee cover increased from Rs. 5 Crore to Rs. 10 Crore for Micro and Small Enterprises (MSEs) under the Credit Guarantee Scheme, effective April 1, 2025. 5.53 lakh guarantees worth Rs. 91,273 crore were extended in the first quarter of FY 2025-26.
* Customized Credit Cards with a limit of Rs. 5 Lakh for micro-enterprises registered on the Udyam Portal are being implemented.
Additional Measures for Credit Access:
* MSME loans meeting specific conditions qualify for priority sector lending.
* Collateral security is not required for loans up to Rs. 10 lakh to MSE sector units by Scheduled Commercial Banks.
* Working capital computation for MSE units to be a minimum of 20% of projected annual turnover for borrowal limits up to Rs. 5 crore.
* Credit decisions for loans up to Rs. 25 lakh to MSE borrowers should not exceed 14 working days.
* Trade Receivables Discounting System (TReDS) facilitates financing of MSME trade receivables through multiple financiers electronically.
* Mutual Credit Guarantee Scheme (MCGSMSME) assists MSMEs in accessing loans up to Rs.100 crores for projects involving purchasing of essential equipment and machinery.
Subsidy Scheme for SC/ST MSMEs:
* Under the National Scheduled Caste and Scheduled Tribe Hub (NSSH), a 25% subsidy (up to Rs. 25 lakh) is provided to SC/ST-owned MSEs for purchasing new plant and machinery.
* Since October 2016, Rs. 321.88 crore in financial assistance has been provided to 2,841 SC/ST beneficiaries until July 28, 2025.
Impact Analysis:
MSMEs:
* Impact: Improved access to credit through increased guarantee coverage, customized credit cards, relaxed collateral requirements, and a subsidy scheme for SC/ST owned enterprises, potentially leading to business growth and expansion.
* Action Required: Register on the Udyam Portal to avail of the Credit Card scheme. SC/ST owned MSEs can apply for subsidies under the NSSH scheme for plant and machinery procurement.
Banks/Financial Institutions:
* Impact: Need to adhere to revised priority sector lending guidelines, collateral-free loan provisions, and working capital computation methods. Must also implement the TReDS system.
* Action Required: Implement the revised guidelines for priority sector lending, collateral requirements, and working capital computation. Facilitate MSME participation in TReDS.
Government Departments/Public Sector Undertakings (PSUs):
* Impact: Involvement in the Trade Receivables Discounting System (TReDS) to facilitate the financing of MSME trade receivables.
* Action Required: Participate in TReDS to ensure timely payments to MSMEs.
Key Entities Referenced
Ministry of Micro, Small and Medium Enterprises: The Indian government ministry responsible for formulating policies and programs to promote the development of micro, small, and medium enterprises.
MSMEs: Micro, Small and Medium Enterprises - businesses that fall under the specified investment and turnover limits as defined by the government.
Budget 2025: The annual financial statement presented by the government, in which policy measures related to MSMEs were announced.
Credit Guarantee Scheme: A scheme under the Ministry of MSME to provide credit guarantee cover to Micro and Small Enterprises (MSEs).
Udyam Portal: An online registration portal for MSMEs in India.
Priority Sector Lending: A scheme where banks are required to allocate a certain percentage of their lending to specific sectors, including MSMEs.
Reserve Bank of India: The central bank of India, which issued guidelines for setting up and operating the Trade Receivables Discounting System (TReDS).
National Scheduled Caste and Scheduled Tribe Hub: A government initiative to promote entrepreneurship among Scheduled Caste and Scheduled Tribe communities, which includes a subsidy scheme for MSEs.
GOVERNMENT OF INDIA
MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES
LOK SABHA
STARRED QUESTION NO. *180
TO BE ANSWERED ON: 31.07.2025
CREDIT SUPPORT TO MSMEs
*180. SHRI RAJA A. :
Will the Minister of MICRO, SMALL AND MEDIUM ENTERPRISES be pleased to state:
(a) whether the Government has announced any policy in order to increase the access to credit by
the MSMEs;
(b) if so, the details thereof;
(c) the number of trade credit cards issued with credit limits upto Rs. 5 lakhs during the last three
months after the announcement in the Budget;
(d) whether any other steps are being taken by the Government to ensure adequate credit support
for MSMEs in the country;
(e) if so, the details thereof;
(f) whether any subsidy scheme has been launched to provide institutional finance to SC/ST
MSME unit holders for procurement of plant and machinery; and
(g) if so, the details thereof?
ANSWER
MINISTER FOR MICRO, SMALL AND MEDIUM ENTERPRISES
(SHRI JITAN RAM MANJHI)
(a) to (g): A statement is laid on the Table of the House.STATEMENT REFERRED TO IN REPLY TO LOK SABHA STARRED QUESTION NO.
180* FOR 31.07.2025 REGARDING "CREDIT SUPPORT TO MSMEs".
(a) to (e): To enhance the access to credit for MSMEs, Government announced the following
policy measures in Budget 2025:
i. Credit guarantee cover has been increased for Micro and Small Enterprises (MSEs), under
Credit Guarantee Scheme of the Ministry of MSME, from Rs. 5 Crore to Rs. 10 Crore, which
has been given effect from 01.04.2025. A total of 5.53 lakh number of guarantees amounting
to Rs. 91,273 crore has been extended to MSEs during the first quarter of FY 2025-26 under
the Scheme.
ii. Government announced provisioning of customized Credit Cards with a limit of Rs. 5 Lakh,
for micro enterprises registered on Udyam Portal. As informed by Department of Financial
Services, implementation of the Budget Announcement has been taken on hand.
The following measures have also been taken to enhance access to credit for MSMEs:
i. Priority Sector Lending Guidelines: In terms of Master Direction on ‘Priority Sector
Lending (PSL)- Targets and Classification’ dated March 24, 2025, all bank loans to MSMEs
conforming to the conditions prescribed therein qualify for classification under priority sector
lending.
ii. Collateral requirements of MSME units: Scheduled Commercial Banks have been
mandated not to demand collateral security in the case of loans up to ₹10 lakh extended to
units in the MSE sector.
iii. Working Capital Computation: Computation of working capital requirements of MSE units
to be done by banks on the basis of simplified method of minimum 20% of the projected
annual turnover of the unit for borrowal limits up to ₹5 crore.
iv. Timeline for credit decisions: For loans up to ₹25 lakh to units in the MSE borrowers, banks
are advised that the timelines for credit decisions shall not be more than 14 working days.
v. Trade Receivables Discounting System (TReDS): Reserve Bank of India (RBI) issued
guidelines for setting up and operating the TReDS. The scheme facilitates the financing of
trade receivables of MSMEs from corporate and other buyers, including government
departments and public sector undertakings (PSUs) through multiple financiers electronically.
Five entities licensed by RBI are presently operating TReDS.: 2 :
vi. Mutual Credit Guarantee Scheme (MCGS-MSME) was launched by the Government to
help Micro, Small and Medium Enterprises (MSMEs) access loans to grow their businesses,
especially for projects involving purchasing of essential equipments and machinery for loans
up to Rs.100 crores.
(f) and (g): Under Special Credit Linked Subsidy Scheme component of National Scheduled
Caste and Scheduled Tribe Hub (NSSH), 25% subsidy (up to Rs. 25 lakh) is provided to SC-ST
owned MSEs for purchase of new plant and machinery and equipment through term loan for all
manufacturing sectors and service sectors. Since the inception of the Scheme in October 2016, until
28.07.2025, financial assistance of Rs.321.88 crore has been provided to 2,841 SC/ST beneficiaries.
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