Credit Support To MSMEs In India: 8 Key Schemes For Stress‑Period Relief & Growth

Micro, Small and Medium Enterprises (MSMEs) are key players in India’s economy, contributing about 29% towards GDP, and 45% of exports. Yet many of them also have credit constraints, particularly in times of stress, which is why the government has launched eight schemes to help unlock collateral-free lending, relax assessments, encourage liquidity in the supply chain, and promote growth digitally and in clusters.

In this article, you will get detailed information about the Top 8 schemes which have been launched for the credit support to MSMEs.

What Is Credit Support To MSMEs During The Stress Period?

Credit Support will ensure a continuous flow of banking credit to MSMEs in the Special Mention Account (SMA) stage (just before becoming Non-Performing Assets (NPA)), and this is done by sharing the risk through a government-promoted fund that maintains liquidity and can prevent defaults.

Schemes Released For The Credit Support To MSMEs During The Stress Period

Check out the key initiatives below that offer financial cushioning, access to infrastructure, and ease of credit flow during stress.

1. Credit Guarantee Scheme For MSMEs in The Manufacturing Sector

To spur and support the manufacturing sector, a new Credit Guarantee Scheme was launched by the Government of India to allow MSMEs to receive collateral-free loans up to ₹100 crore by taking the operational credit risk out of the lender’s hands via a self-funded guarantee scheme. The scheme will enable banks to lend more freely with respect to providing loans to borrowers in the small and medium manufacturing space, because if the loan defaults, the scheme will cover it. The scheme is also part of the government's initiative "Make in India" to generate employment, increase capacity utilisation, and bolster GDP and export contributions from the sector.

2. PSBs To Develop New Assessment Model For MSME Credit

Recognising the evolving nature of MSMEs and the limitations of traditional financial records, Public Sector Banks (PSBs) are now developing in-house digital assessment models. These models leverage non-traditional indicators to assess creditworthiness, including UPI transactions, e-commerce activity, GST data, and utility payments, especially beneficial for new or informal MSMEs with no years of audited financial statements. The development of the models aims to broaden credit accessibility to digitally active, yet underserved MSMEs and reduce the turnaround time for loan approvals while improving the accuracy of credit risk assessments, contributing to financial inclusion and digital innovation in lending.

3. Credit Support To MSMEs During Stress Period From A Govt Promoted Fund

The Government of India has introduced a new credit mechanism to help MSMEs that are at the Special Mention Account (SMA) stage (1 and 2) just before they go into NPA. This mechanism relies on a guarantee fund set up by the government for lending to distressed MSMEs, allowing banks to lend to stressed companies without the fear of complete losses. As of March 2024, Gross NPAs for MSMEs stood at 4.4%. This scheme aims to prevent defaults and provide continuity of business while helping companies preserve jobs affected by external shocks (sudden drop in demand, delay in payment, etc). There are two principal goals in this mechanism: early intervention and long-term health of the small business and the health of the financial system as a whole.

Also Read: Top 10 Women's Loan Schemes 2025 In India.

4. Mudra Loans Enhanced For Credit-Worthy Entrepreneurs To ₹20 Lakh

To provide better leverage and opportunity, the Government of India has increased the limit of Mudra loans under the 'Tarun' category from ₹10 lakh to ₹20 lakh to allow micro-entrepreneurs who have demonstrated their ability to repay loans to leverage the funds to scale up, purchase more machinery, increase their market size, etc. In FY24, over 6.67 crore Mudra loans amounting to ₹5.4 lakh crore were sanctioned, underscoring the high demand for these loans. Doubling the loan requirement allows the government to support a faster level of growth while simultaneously rewarding repayment discipline. Demand especially comes from women entrepreneurs, rural business owners, and first-time borrowers who typically face hurdles when seeking access to large institutional credit.

5. Turnover Threshold For Buyers Halved For Mandatory Onboarding In TREDS

The turnover threshold for large buyers onboarding into the Trade Receivables Discounting System (TReDS) has been halved from ₹500 crore to ₹250 crore to facilitate greater Working Capital access. The reduction will facilitate the onboarding of approximately 7,000 new buyers, including 22 central public sector enterprises (CPSEs), which increases invoice discounting opportunities for MSMEs. TReDS enables buyers to settle invoice payments quickly using third-party financing whilst allowing vendors to obtain liquidity, without resorting to borrowings. The reduction in threshold promotes wider supply chain financing, reduces payment lag time, and provides additional credit to vendors, altogether promoting MSME cash flow and reducing credit stress.

6. New SIDBI Branches In MSME Clusters For Easier And Direct Credit Access

To strengthen the operational access of MSMEs to financial services, SIDBI (Small Industries Development Bank of India) will launch 24 new branches across prominent MSME clusters in 2024. This is a component of a national rollout which will see 168 branches established in 242 districts over three years in areas with high industrial potential. With an enhanced local presence, SIDBI can improve the quality of advice and provide timely, bespoke credit services when and where they’re needed by small businesses. Moreover, the cluster-based branches will become resource and knowledge centres about credit, compliance, and managing government schemes, with the objective of localised client opportunities. This decentralised approach will reduce the reliance on middlemen within the local environment, enabling better financial inclusion outcomes at a grassroots level.

Also Read: Top 10 Important Documents For The Citizens Of India

7. New MSME Units For Food Irradiation, Quality & Safety Testing

The MSME Ministry has proposed support for 50 multi-product food irradiation centres and 100 quality and safety testing units, which are accredited by NABL. This initiative aims to facilitate food processing infrastructure, curb post-harvest losses, and maintain the safety of products in the domestic and export markets. It will be particularly beneficial to agro-based MSMEs and startups working in food production, packaging and export. As consumers have become increasingly discerning about quality and regulatory compliance, the ability for small businesses to contract with labs nearby will allow them to comply with safety standards, while also ensuring that their products are not rejected. The scheme will stimulate innovation for MSMEs developing value-added food items and assist them in becoming part of global supply chains.

8. E-Commerce Export Hubs, MSMEs, And Traditional Artisans' Access To International Markets

To increase exports of traditional crafts and products on a small scale, the government will set e-commerce export hubs in collaboration with private players, to digitally onboard artisans, weavers, and MSMEs, who will subsequently be connected directly to buyers globally. This initiative involves training, logistics, digital payment access and marketing support. It will allow producers at the small end of the scale to avoid extra layers of intermediaries and permit them to go international through online platforms. This not only complements the ‘One District, One Product’ initiative, but also increases the visibility of Indian craft and potentially rural jobs. Overall, contributing to sustainable rural economic development via digital trade.

Why Choose Jaagruk Bharat Services To Avail Government Schemes Benefits?

Navigating through government schemes can be complicated, especially for busy MSMEs. Jaagruk Bharat Services helps alleviate this process, providing professional assistance in registrations, documentation and approvals for government schemes such as Mudra, SIDBI loans and TReDS. We ensure that you avail yourself of the right benefits at the right time, so that your business can thrive easily.

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