Budget 2023 | Revamped credit guarantee scheme for MSMEs to be implemented from April 1

The revamped credit guarantee scheme for Micro, Small and Medium Enterprises (MSMEs) will take effect from April 1, through infusion of ₹9,000 crore in the corpus, said Union Finance Minister Nirmala Sitharaman while presenting the Union Budget 2023.

“This will enable additional collateral-free guaranteed credit of ₹2 lakh crore. Further, the cost of the credit will be reduced by about 1%,” she said.

“Further, in cases of failure by MSMEs to execute contracts during the COVID-19 period, 95% of the forfeited amount relating to bid or performance security will be returned to them by government and government undertakings. This will provide relief to MSMEs”, the Finance Minister said.

The total allocation for the MSME Ministry will see a nearly 42% increase for 2023-24 with ₹22,138 crore to be made available compared to ₹15,629 crore in 2022-23. Schemes such as Raising and Accelerating MSME Performance (RAMP) and Scheme for Fund for Regeneration of Traditional Industries (SFURTI) will see significantly higher allocation compared to FY23.

The Federation of Indian Micro and Small & Medium Enterprises (FISME) and the Coimbatore District Small Industries Association (CODISSIA) said in press statements that to ensure MSMEs received payments on time, the Budget has proposed that deduction for expenditure incurred on payments made to MSMEs will be allowed for buyers only when the payment is actually made. This means buyers cannot claim deduction without paying the MSMEs.

The FISME added that setting up of a National Financial Information Registry will help create a robust information system and help MSMEs access loans. The Common Universal Identifier for businesses proposed in the Budget will also rid MSMEs of the need for having multiple identities, it added.