Union Budget 2025: Increased Loan Guarantee for MSMEs

The Union Budget has been presented today, featuring several key announcements. One of the significant highlights is the enhancement of the loan guarantee scheme for MSMEs (Micro, Small, and Medium Enterprises).

As per the announcement, the loan guarantee limit under the MSME scheme has been increased from ₹5 crore to ₹10 crore. Over the next five years, this change is expected to facilitate an additional ₹1.5 lakh crore in loans. This initiative aims to support high-tech advancements, improve capital access, and boost investment. Additionally, the turnover threshold for all MSMEs has been increased by 2.5 and 2 times, respectively. Finance Minister Nirmala Sitharaman emphasized these benefits in her budget speech.

This move is a game-changer for small and medium businesses in India. By removing collateral requirements, the scheme provides much-needed financial support for MSMEs to grow and thrive. With over 63 million MSMEs contributing significantly to India’s GDP and employment, ensuring seamless credit access is crucial for their development. This initiative empowers entrepreneurs to focus on innovation and business expansion without financial constraints.

What is the MSME Loan Guarantee Scheme?

The MSME Loan Guarantee Scheme was introduced to ease the challenges small businesses face in securing loans without collateral. It is managed through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), a joint initiative by the Government of India and SIDBI (Small Industries Development Bank of India).

The scheme aims to:

Provide collateral-free loans to MSMEs.
Encourage banks and NBFCs (Non-Banking Financial Companies) to lend to small businesses without the risk of default.
Support first-time entrepreneurs in launching their ventures successfully.