NEW DELHI: The Union Budget 2025-26 has introduced several significant measures to bolster the Micro, Small, and Medium Enterprises (MSME) sector, including an increase in credit guarantee cover, investment, and turnover limits.
Credit guarantee cover serves as a financial safety net provided by a government-backed entity to lenders, ensuring that a substantial portion of loans given to MSMEs is repaid even in cases of borrower default. This reduces the need for collateral, encourages banks to extend credit to small businesses, and enhances financial access for entrepreneurs.
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In a major boost to the sector, the credit guarantee cover for micro and small enterprises has been raised from โน5 crore to โน10 crore, facilitating an additional โน1.5 lakh crore in credit over the next five years. For startups, the guarantee cover has been doubled from โน10 crore to โน20 crore, with a reduced fee of 1% for loans in 27 priority sectors.
Kiran Dev, CEO of BizongoFin, welcomed the initiative, stating, โIncreasing the credit guarantee cover from โน5 crore to โน10 crore is a crucial step that will unlock โน1.5 lakh crore in additional credit over the next five years.โ
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Dev further added, โA term loan of up to โน20 crore will be provided to well-run export-oriented MSMEs, further supporting their expansion. With MSMEs employing 7.5 crore individuals and contributing 36% to manufacturing, these measures will bolster their growth, enhance financial access, and reinforce Indiaโs position as a global manufacturing hub.โ
BizongoFin, the fintech division of Bizongo, specializes in embedded supply chain financing solutions to address the unmet credit needs of small and medium-sized enterprises (SMEs).
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Finance Minister Nirmala Sitharaman also announced that export-oriented MSMEs can now access term loans of up to โน20 crore with enhanced guarantee cover, aimed at improving their international trade competitiveness.
Giridharan Natarajan, Co-founder and CEO of MVPRockets, highlighted the impact of these initiatives on MSMEs like his. โThe Union Budget 2025-26 represents a significant leap forward for tech-focused MSMEs like MVP Rockets. As a rapidly growing AI solutions provider, we particularly applaud the governmentโs forward-thinking approach in revising the MSME classification limits. The 2.5-fold increase in investment limits and doubled turnover thresholds are exactly what technology companies need to scale without losing crucial MSME benefits.โ
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The investment limits for MSME classification have been increased by 2.5 times, and turnover limits have been doubled in the latest budget. Commenting on this, Natarajan added, โIn the fast-evolving tech sector, where capital requirements for AI infrastructure and talent are substantial, the enhanced credit guarantee cover from โน5 crore to โน10 crore is a game-changer. This will enable companies to invest more aggressively in cutting-edge technology, research, and development while maintaining our competitive edge in the global market.โ
He further emphasized, โThe projected additional credit flow of โน1.5 lakh crore over the next five years comes at a crucial time when MSMEs are positioning themselves at the forefront of the global AI revolution. These measures will help bridge the capital gap that often constrains innovation and expansion in the tech sector.โ
Natarajan also sees these policy changes as a testament to the governmentโs commitment to Indiaโs tech ecosystem. โMVP Rockets sees these policy changes as a strong endorsement of the governmentโs commitment to supporting Indiaโs tech ecosystem. The new framework will enable us to accelerate our AI initiatives while continuing to create high-skilled employment opportunities for Indiaโs tech talent. We believe these reforms will catalyze the transformation of Indiaโs MSME tech sector into a powerhouse of innovation and digital excellence.โ
CS Setty, Chairman of the State Bank of India (SBI), provided an overarching view of the budgetโs impact, stating, โThe Union Budget reaffirms India as an innovation- and knowledge-centric economy with a slew of reforms across agriculture, MSMEs, export orientation, education, and healthcare, while also balancing skills and AI. The rationalization of personal tax reforms could unleash a potential consumption boom of at least โน3.3 trillion over baseline.โ
He further remarked, โThe fiscal numbers are conservative. The budget has several bold initiatives for the agricultural sector aimed at boosting farmersโ income through crop diversification, participation in agri-value chains, and focus on allied activities. The MSME sector will benefit from expanded credit availability through credit guarantees, empowering women entrepreneurs, and credit cards for micro-enterprises. The enhancement of TCS limits on remittances and the enhancement of TDS limits for senior citizens will significantly simplify the ease of doing business. Overall, the budget is a significant step towards making India a global hub for innovation and advanced manufacturing.โ
The Union Budget 2025-26 underscores the governmentโs commitment to fostering MSME growth, boosting financial inclusion, and strengthening Indiaโs position as a leader in innovation and manufacturing
