Union Budget 2025: Govt Cuts Credit Guarantee Fee For Credit For Startups In 27 Sectors

Finance minister Nirmala Sitharaman said in her Union Budget 2025 speech that the guarantee fee under the credit guarantee scheme for startups for credit between INR 10 Cr to INR 20 Cr for 27 focus sectors will be cut to 1%.

While the FM didn’t announce the name of the sector, she said these are the segments which are important for ‘Atmanirbhar Bharat’ initiative.

The FM also said that the credit guarantee cover will be enhanced for MSMEs opting for INR 5 Cr to INR 10 Cr loans. This would result in an additional credit of INR 1.5 Lakh Cr in the next five years.

For micro enterprises registered on the Udyam Portal, the government will introduce a customised credit card with a limit of up to INR 5 Lakh. In the first year, 10 Lakh such cards will be introduced.

Beside, the FM added that the credit guarantee cover will also cover exporter MSMEs availing term loans of up to INR 20 Cr.

Terming the MSME sector as the second growth engine for transforming India, the FM highlighted the importance of the sector. She added that over 1 Cr registered MSMEs employ over 7.5 Cr people and generate almost 36% of the country’s total manufacturing. 

She added that the MSMEs contribute to almost 45% of the country’s total exports.

“To help them achieve higher efficiencies of scale, technological upgradation and better access to capital, the investment and turnover limits for classification of all MSMEs will be enhanced to 2.5 and 2 times respectively,” the FM said. 

To further bolster the Indian startup ecosystem, the FM announced setting up a new Fund of Funds for startups with expanded scope and a fresh contribution of another INR 10,000 Cr. 

The FM also extended the incorporation date for startups to avail tax benefits like income tax breaks by 5 years till April 1, 2030.