Lok Sabha Question No. 2206 (UNSTARRED), answered on 2024-12-09
Subject: Improved Access of MSMEs to Finance
Ministry: FINANCE
Asked by: Thiru Dr. S Jagathratchakan

## GOVERNMENT OF INDIA

## MTNISTRY OF FINANCE

## DEPARI'MENT  OF FINANCIAL SERVICES

## LOK SABHA

## UNSTARRED  QUESTION  NO. 2206

ANSWERED  ON MONDAY, THE DECEMBER9,2024118  AGRAHAYANA,  1946 (Saka)

## IMPORVED  ACCESS OF MSMEs TO FINANCE

## 2206. SHRI S JAGATHRATCHAKAN:

Will the Minister  of FINeNCE be pleased to state:

- (a) whether  the Government is cognizant that improving access to finance  for Micro, Small and Medium Enterprises (MSMEs) is the key factor to become  the cornerstone of a $S-trillion economy; and
- (b) if so, the details of the steps taken/proposed  to be taken by the Government to bridge the gap MSMEs face in terms of availability of finance?

## ANSWER

## MINISTER OF STATE IN ]'I-IE MINISTRY  OF FINANCE (SHRI PANKAJ CHAIJDHARY)

(a) & (b): The importance  of Micro, Small and Medium Enterprises (MSMEs) is well recognized as one of the key contributors to the Indian economy with Gross Value Added  (GVA) of around 29o/o of India's Gross  Domestic Product (GDP), and creating cmployment opportunities fbr I I crore Indians.

'l'he steps taken to facilitate  the flow of credit to MSME sector are as fbllows

- I New revised criteria for classification of MSMEs based on both investment  size and turnover.
- ii 'Udyam Registration'  for MSMEs,  for ease of doing business.
- iii Inclusion of Retail and Wholesale Traders as MSMEs w.e.f. 2.7 .2021.
- iv Pradhan Mantri Mudra Yojana (PMMY)  scheme launched in April, 2015 to provide  collateral free access to institutional  finance to unfunded  Micro/Small  business units with collateral  free loans. The limit of Mudra loans under the PMMY  has been enhanced  from earlier  levelof Rs. l0 lakh to Rs. 20 lakh and a new category of Tarun Plus has been added where loans upto Rs. 20 lakh would be available to the entrepreneurs who have availed and successfully repaid previous loans under the Tarun category.
- Computation  of working capital  requirements  of MSE units to be done by banks on the basis of simplified method  of- minimum  20o/o of the projected  annual turnover of the unit fbr borrowal limits up to {5 crore. V.
- For loans up to {25 lakh to the MSE borrowers, banks are advised  that the timelines for credit decisions shall not be more than l4 working days. vi.
- vlt In the wake of Covid-19 pandemic, Emergency Credit Line Guarantee  Scheme (ECLGS)  was launched in May, 2020 to support eligible Micro, Small and Medium Enterprises (MSMEs) and other business enterprises  in meeting their operational  liabilities and restarting their businesses.
- vlll Trade Receivables  Discounting System  (TReDS)  has been operationalized to address the problem  of delayed payments to MSMEs. Further, Gazette Notification dated 7.11.2024has been issued by the Ministry  of Micro, Small  & Medium  Enterprises (M/o MSME), reducing the turnover threshold for companies to onboard on TReDS fiom Rs. 500 crore to Rs. 250 crore.
- For better transmission  of monetary policy and transparency in pricing, RBI has advised  banks to link all new floating  rate loans to external benchmark lbr MSEs  fiom 01.10.2019  and Medium enterprises from 0l .04.2020. ix.
- Target of 7.5 percent of Adjusted  Net Bank Credit (ANBC), or Credit Equivalent Amount of Off-Balance  Sheet E,xposure, whichever  is higher, fixed for Scheduled Commercial Banks (SCBs)  fbr lending  to Micro Enterprises. under priority sector lending norrns. X
- RBI has facilitated  the AA framework under which information  related to financial assets of a customer  is collected  from the holders  of such infbrmation (Financial Information Providers) (FIP) and is presented  to the customers  or specified  users (Financial Information Users) digitally through a secured process.  GSTN has been included in the AA ecosystem  as an FIP fbr ease of MSME lending. xi.

The following announcements  made in Union Budget 2024-25 fbr supporting MSMEs are being implemented:

- l. A credit guarantee  scheme will be introduced  to facilitate term loans to MSMEs for purchase of machinery  and equipment  without collateral  or third-party  guarantee.
2. Public Sector Banks to build their in-house capability to assess MSMEs  and will take a lead in developing or getting developed  a new credit assessment model, based on the scoring of digital footprints of MSMEs.
3. Credit availability will be facilitated to MSMEs during  their stress period  through a guarantee from a government  promoted  fund.

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