MSMEs to have access to collateral-free loans

Finance Minister Nirmala Sitharaman unveiled a new credit guarantee scheme for MSMEs, offering collateral-free loans of up to Rs. 100 crore. The scheme is designed to address the challenges MSMEs face in obtaining term loans for machinery and expansion.

The Union Finance and Corporate Affairs Minister, Nirmala Sitharaman, announced that the Ministry of Micro, Small, and Medium Enterprises (MSMEs) will soon offer collateral-free loans of up to Rs 100 crore through a new credit assessment model by PSU banks. Speaking at the National MSME Cluster Outreach Programme in Bengaluru, she explained that this initiative, part of a new credit guarantee scheme, aims to address long-standing grievances of MSMEs, particularly their difficulty in obtaining term loans and loans for plant and machinery.

The new scheme will provide a guarantee for the first Rs 100 crore, enabling MSMEs to access loans without the need for collateral or third-party guarantees. The Minister emphasized that the government’s backing will facilitate this process, offering significant relief to MSMEs that struggle with financing. While explaining the benefit of the new assessment system, she added, “Now we have announced in this budget that banks will do the credit assessment within themselves. Each bank will have their own credit assessment model.”

She highlighted the establishment of e-commerce trade hubs in partnership with the private sector, which will support international trade and export-related services. These hubs will benefit 20 industrial clusters, with the opening of six new branches of the Small Industries Development Bank of India (SIDBI) in Karnataka, aimed at
strengthening MSMEs in the state. She also noted that SIDBI’s branches in Karnataka currently hold an outstanding portfolio of Rs 1,169 crore, with nearly zero non-performing assets (NPAs).

The Minister stated that these initiatives would enhance the capabilities of industries not only in Karnataka but across the entire country by providing direct finance options to MSMEs.