Union Budget 2025: Boosting MSMEs with New Credit Schemes and Classification Changes

February 21, 2025

The Union Budget 2025-26 has unveiled transformative measures to bolster India's Micro, Small, and Medium Enterprises (MSMEs), recognizing their pivotal role in economic growth and employment generation.

Enhanced MSME Classification Criteria

To facilitate scalability and technological advancement, the government has revised the MSME classification thresholds:

This strategic enhancement is designed to empower MSMEs to expand operations without the apprehension of losing their classification benefits. 

Augmented Credit Guarantee Schemes

Access to finance has been a longstanding challenge for MSMEs. Addressing this, the budget proposes significant enhancements:

• Micro and Small Enterprises: Credit guarantee cover doubled from ₹5 crore to ₹10 crore, facilitating an additional credit flow of ₹1.5 lakh crore over the next five years.
• Startups: Guarantee cover increased from ₹10 crore to ₹20 crore, with a reduced guaranteed fee of 1% for loans in 27 priority sectors.
• Exporter MSMEs: Enhanced guarantee cover for term loans up to ₹20 crore.

These measures aim to mitigate financial risks for lenders and make credit more accessible to MSMEs. 

Customized Credit Cards for Micro Enterprises

In a pioneering move, the government will introduce customized credit cards with a ₹5 lakh limit for micro-enterprises registered on the Udyam portal. In the first year, 10 lakh such cards are slated for issuance, providing micro-enterprises with flexible credit options to meet their working capital needs. 

Support for First-Time Entrepreneurs

Recognizing the importance of inclusive growth, a new scheme will offer term loans up to ₹2 crore over the next five years to 5 lakh first-time entrepreneurs, focusing on women and individuals from Scheduled Castes and Scheduled Tribes. This initiative draws inspiration from the successful Stand-Up India scheme and aims to foster entrepreneurial spirit among underrepresented groups. 

Export Promotion Mission

To bolster MSME exports, an Export Promotion Mission will be established, jointly driven by the Ministries of Commerce, MSME, and Finance. The mission will facilitate easy access to export credit, provide cross-border factoring support, and assist MSMEs in navigating non-tariff measures in international markets. 

These comprehensive measures underscore the government's commitment to empowering MSMEs, fostering innovation, and driving inclusive economic development.