Pre-Budget: PHDCCI suggests measures to improve credit flow to MSMEs, lower compliance burden

New Delhi, Jan 7 (PTI) Reintroduction of an interest subvention scheme for MSMEs and upward revision of MUDRA loan ceilings were among the various measures industry lobby PHDCCI suggested for the upcoming Union Budget.

The suggestions, PHDCCI said, were aimed at catering to the financing needs of MSMEs, lower their regulatory burden and make them globally competitive.

The industry body suggested reintroduction of an interest subvention scheme for MSMEs with a 2 per cent interest subsidy on new and incremental loans from banks and NBFCs, arguing that lower borrowing costs are expected to improve repayment discipline and enhance competitiveness.

It also pitched for upward revision of MUDRA loan ceilings, from Rs 50,000 to Rs 1 lakh for Shishu category and from up to Rs 5 lakh to up to Rs 10 lakh for the Kishore category.

The Pradhan Mantri Mudra Yojana (PMMY) has created products/schemes, wherein interventions have been named 'Shishu', 'Kishore', 'Tarun' and 'Tarun Plus' to signify the stage of growth/development and funding needs of the beneficiary micro unit/ entrepreneur.

Among other suggestions, PHDCCI has called for equity infusion through fund of funds, especially for start-ups to cater to their seed capital requirements and facilitate them to grow at a faster rate.

The industry lobby has further suggested expanding the scope of MSME facilitation councils, as under the MSME Development Act, 2006, only small businesses can approach such councils to get help with payments that are late.

It argued that this help should also be available to medium-sized businesses.

Moreover, it said, for fast-track adoption of modern, green, and eco-friendly technologies, the Credit Linked Capital Subsidy Scheme shall be enhanced with investment ceiling of Rs 2 crore from a limit of Rs 1 crore, as it no longer reflects current technology costs.

Besides, PHDCCI sought removal of tax audit burden for micro enterprises with annual turnover of up to Rs 10 crore.

"Amendments to Section 44AB of the Income Tax Act is proposed to exempt all micro enterprises with turnover up to Rs 10 crore from mandatory tax audits, irrespective of profit margins. This is expected to reduce compliance costs, estimated at Rs 75,000–Rs 1.5 lakh annually," it added. PTI RSN TRB