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MSMEs Get Easier Access to Loans in Budget 2019 Research Team | Posted On Monday, April 29,2019, 05:57 PM

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MSMEs Get Easier Access to Loans in Budget 2019



Being one of the major sectors for growth and employment in India, the Government plans to improve financing for the capital requirements of the MSME industry. The Union Budget 2019 focuses on reviewing policies regarding lending in the priority sector, bring about changes in the taxation format of the MSME sector and impart development measures for the Fintech Industry; which will help in the growth of the MSME sector by offering easy credit.

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MSMEs Get easier access to loans in Budget 2019

What are MSME Loans?

MSME loans refer to a kind of monetary assistance provided to micro, small and medium enterprises, either to start a business or for the growth of an existing business. The main purpose of these loans is to empower small businesses by providing them easy credit, without any collateral or third party guarantee.

The MSME loan is offered to the priority sector which consists of micro, small and medium industries. The priority sector impacts a large section of the population, the weaker sections and the sections which are employment intensive like, agriculture, education, housing, micro and small enterprises and cottage industries.

The Finance Minister of India has introduced a number of proposals targeting the micro, small and medium enterprises (MSME) sector during the 2018-19 Union Budget. During the meeting, the minister had voiced his proposals, regarding the initiatives and reforms that must be carried out in the MSME sector, which primarily aims at offering prompt loans, incorporating policies for non-performing assets and reducing the tax burden.

Easier availability for MSME loans:

There is a lack of substantial funding required for the growth of small and medium enterprises in the country. Therefore, securing funds is one of the most prominent challenges faced by the small and medium industries. The government has identified this problem in the SME and MSME sector, whose credit needs must be prioritized in order to help them expand their businesses, reduce debt and avail easy credit to improve prospects related to these businesses.

To tackle this problem, the government has announced the launching of an online portal which can sanction loans up to Rs 1 Crore within 59 minutes, to help fund businesses and operational activities of MSMEs. Further the RBI decision to permit one-time restructuring of MSME loans that have defaulted, but are not non-performing as of January, have received a positive response from the small and medium enterprises.

In the Union Budget 2019, the SMEs and MSMEs are expecting the government to come up with ways of tackling fund related problems, so that they have easy access to loans, which would enable them, facilitate business growth and contribute significantly to the country’s economic growth.   

SEE ALSO: Budget 2019 India Expectations

Enhancement of digital lending sector:

The digital lending sector helps avail loans online through digital lending companies who use technology to originate, underwrite and disburse loans effectively to end-users. In an emerging digital economy like India, this form of lending is undertaken by Fintech companies. The digital lending sector is able to efficiently address the sizable demand for credit across various sectors like MSME and SME.

The digital lending sector has the capacity to propel the growth of small and medium enterprises by disbursing funds using technology and e-KYC verification system. Considering the immense potential of the digital lending sector, the government is expected to bring about friendly reforms and allocate money to the digital lending sector in the upcoming budget. With the expected government initiative, digital lending can make small businesses financially stronger with easier access to loans.

Budget 2019 tax reforms for Small Business:

In the previous year, the government had hinted at bringing down the lending rates for micro, small and medium enterprises along with providing tax benefits to this sector. The government has also announced a few measures that are aimed at providing better credit facilities to MSMEs.

MSME bodies like TANSTIA and MIWA have proposed certain changes in the Union Budget 2019, along with tax exemptions for MSME units. It is expected that the government will provide some tax benefits like mitigation of the compliance burden, easing of working capital blockages and reduce tax rates in the upcoming union budget.

SMEs are expected to get more tax breaks in the upcoming Union Budget. A tax holiday will benefit the SME sector big time, and enable reduction in tax outgo. It is very likely that if the government announces a tax break for the SME sector, it will be confined to a certain limit.

The next Budget is likely to be a turning point if the government announces the above-mentioned reforms for the MSME and SME sector. These reforms would greatly help MSMEs and SMEs grow their businesses and in turn, contribute to the growth of the economy.

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