Lok Sabha Question No. 564 (UNSTARRED), answered on 2025-02-06
Subject: Credit Rating System for MSMEs
Ministry: MICRO, SMALL AND MEDIUM ENTERPRISES
Asked by: Shri Vijayakumar Alias Vijay Vasanth, Shri Manickam Tagore B

## GOVERNMENT OF INDIA MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES

## LOK SABHA UNSTARRED QUESTION NO. 564 TO BE ANSWERED ON 06.02.2025

## CREDIT RATING SYSTEM FOR MSMEs

## 564. SHRI VIJAYKUMAR Alias VIJAY VASANTH: SHRI MANICKAM TAGORE B:

Will the Minister of MICRO, SMALL AND MEDIUM ENTERPRISES be pleased to state:

- (a) the  reasons  for  not  establishing a  credit  rating  system  for  MSMEs, especially when 95% of them lack access to formal credit and given that MSMEs contribute 30% to GDP and employ over 110 million people;
- (b) whether this is hindering their access to subsidy, if so, the details thereof;
- (c) whether it is true that despite the Government's claim of supporting MSMEs, a 2024 survey found that over 60% of MSMEs face challenges in accessing Government subsidies due to the absence of a formal credit rating system, if so, the reasons for neglecting this issue especially taking into the account of the MSMEs' vital role in the economy;
- (d) whether  it  is  true  that  the  recent  reports  indicate  only  15%  of  MSMEs  avail  benefits  from  subsidy schemes  due  to  the  lack  of  a  credit  rating  system,  if  so,  the  reasons  for  not  addressing  the  issue  which  is restricting growth in such a crucial sector; and
- (e) the reasons for not implementing a system to support MSMEs in availing subsidies?

## ANSWER

## MINISTER OF STATE FOR MICRO, SMALL AND MEDIUM ENTERPRISES (SUSHRI SHOBHA KARANDLAJE)

(a) and (b): The  access  to  formal  credit  for  the  Micro,  Small  and  Medium  Enterprises  (MSME)  sector  has increased in recent years. RBI data shows that the credit outstanding to MSME Sector has increased to Rs 27.25 lakh crore as on 31.03.2024 from Rs.10.39 lakh crore as on 31.03.2014. For uninterrupted flow of credit to the MSME sector,  a  series  of  measures  have  been  undertaken,  which  inter-alia  include  schemes  such  as  Prime Minister's Employment Generation Programme (PMEGP) for setting up of new micro enterprises in the non-farm sector  by  providing  Margin  Money  (MM)  subsidy  on  the  Bank  loan,  Special  Credit  Linked  Capital  Subsidy Scheme (SCLCSS) with a provision of 25% subsidy to SC/ST MSEs on institutional finance for procurement of Plant & Machinery / Equipment,  Credit Guarantee Scheme for MSEs for collateral free loans for Micro & Small Enterprises,  collateral  free  loans  upto  Rs  20  Lakh  for  Informal  Micro  Enterprises,  PM  Vishwakarma, Mudra Loan, etc.

In this direction, the Union Budget 2024-25 announced a package for MSMEs as given below:

-  Credit Guarantee Scheme for MSMEs in the Manufacturing Sector;
-  New assessment model for MSME credit;
-  Credit Support to MSMEs during Stress Period;
-  Mudra Loans limit enhancement from Rs. 10 lakh to 20 lakh;

(c) to (e): All banks/financial institutions undertake rating of the prospective MSME before sanctioning any loan,  which  is  also  reviewed  annually  by  all  banks/financial  institutions.  An  MSME  can  also  obtain  MSME rating  from  any  external  agency.  The  Ministry  of  MSME  takes  various  measures,  including  awareness programmes, including subsidy schemes  for the  beneficiaries  e.g.  PMEGP,  under  which  more  than  9.96 lakh micro enterprises have been assisted with Margin Money (MM) subsidy of Rs.26,492.84 crore, since inception till  FY  2024-25  (up  to  31.01.2025),  and  under  Special  Credit  Linked  Capital  Subsidy  Scheme,  an  amount  of Rs.288.16 crore has been disbursed towards 2,503 SCLCSS claims, till date. The information is also available in the public domain on websites such as udyamimitra portal (www.udyamimitra.in)