Budget 2023: Credit Guarantee Scheme for MSMEs gets Rs 9,000-cr boost

The government will infuse Rs 9,000 crore into the Credit Guarantee Scheme for micro, small and medium enterprises (MSMEs), enabling lenders to dispense additional credit worth Rs 2 trillion.

This is expected to reduce the cost of credit by 1 per cent for MSMEs, said Union Finance Minister Nirmala Sitharaman on Wednesday.

Last year, the government mooted revamping the scheme; the revised scheme will come into effect from April 2023.

A K Goel, chairman, Indian Banks’ Association (IBA) and MD & CEO, Punjab National Bank, said: “An enhanced corpus of the scheme for MSMEs, and less stringent contract execution would encourage the flow of credit to MSMEs.”

Referring to the impact of the scheme, Sarosh Amaria, MD, Tata Capital Financial Services said it would help plug working capital gaps for small businesses.

Gurpreet Chhatwal, managing director, CRISIL Ratings, was of the view that MSMEs, which are yet to recover fully from Covid disruptions, would benefit from the revamped Credit Guarantee Scheme.

Demand from NBFCs was to advance hassle-free credit access. An allocation of Rs 9,000 crore would be a big relief to MSMEs in the current inflationary conditions, said Shachindra Nath, vice-chairman and MD, U GRO Capital.