MSMEs to Access Collateral-Free Loans up to Rs 100 Crore: Finance Minister

Union Finance Minister Nirmala Sitharaman announced on Saturday that India’s Micro, Small, and Medium Enterprises (MSMEs) will soon have access to collateral-free loans of up to Rs 100 crore, enabled by a new credit assessment model developed by public sector banks.

Speaking at the National MSME Cluster Outreach Programme in Bengaluru, she highlighted the initiative as part of the government’s ongoing support for MSMEs, which are critical to the economy.

New Credit Guarantee Scheme to Support MSMEs

The Finance Minister emphasized that the long-standing issue of limited loan options for MSMEs, particularly for plant and machinery financing, will be addressed with the new credit guarantee scheme. She explained that this scheme, soon to be introduced in the Cabinet, is aimed at facilitating credit access for MSMEs without requiring collateral or third-party guarantees.

“The government will provide a guarantee for the first Rs 100 crore of any loan, allowing MSMEs to approach banks with a collateral-free model,” said Sitharaman. The scheme, previously announced in the Union Budget, is expected to ease the credit process and increase MSME sector growth.

Enhanced Credit Assessment and E-commerce Hubs for MSMEs

Under the new framework, each bank will develop its own credit assessment model, enabling better alignment with the individual credit needs of MSMEs. Sitharaman noted that this internal assessment model will streamline the loan approval process and make it easier for MSMEs to secure funding for expansion and growth.

Additionally, the Finance Minister revealed plans to set up e-commerce trade hubs through public-private partnerships. These hubs aim to facilitate international trade and export services for MSMEs, with an initial rollout covering 20 industrial clusters. The move includes six new branches of the Small Industries Development Bank of India (SIDBI) across Karnataka, which will support MSMEs in accessing both domestic and international markets.

Strengthening MSMEs through SIDBI Support

Sitharaman also highlighted SIDBI’s role in strengthening the MSME sector, noting that its Karnataka branches hold an outstanding portfolio of Rs 1,169 crore with negligible non-performing assets (NPAs). The Minister emphasized that SIDBI’s direct financing services would empower MSMEs across Karnataka and India, enhancing their competitiveness and sustainability in the global market.

With these initiatives, the government seeks to drive MSME growth, improve access to capital, and strengthen India’s position in the global economic landscape.