Parliamentary panel proposes credit cards for MSME entrepreneurs

The Parliamentary Standing Committee on Finance (SCOF) has reportedly proposed providing a credit card to MSME entrepreneurs similar to Kisan Credit Cards in an effort to ensure credit access to small businesses and incorporate them into a formal financing system.

The goal is to help the small businesses with working capital, trade financing, provide capital loans at affordable rates, and necessary credit guarantees, according to Economic Times. The plan is to do so by signing up for the Udyam portal and automatically obtaining the Vyapar credit card.

At present, only 6.34 crore MSMEs, which make up less than 40 percent of the country’s MSMEs, have borrowed from the formal financial system.

Former Minister of State for Finance and Chairman of the committee Jayant Sinha believes such a platform will make it possible to provide MSME with an affordable line of credit. Last week, Chief Economic Adviser V Anantha Nageswaran remarked that bank credit is beginning to pick up, especially in the MSME sector at an event organised by AIMA. 

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During the Union Budget 2022, which focused on three pillars of inclusive welfare — financial aid, digital transformation, and upskilling — Finance Minister Nirmala Sitharaman reiterated its commitment to creating a strong MSME and startup ecosystem. 

The government also ensured MSMEs can avail themselves of the required credit to deal with the pandemic-battered economy by extending the Emergency Credit Line Guarantee Scheme (ECLGS) until March 31, 2023.

It had ensured credit support of an additional Rs 2 lakh crore to MSMEs in the form of Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE). 

According to Arun Poojari, Co-founder and CEO of Cashinvoice, "Supply chain financing is a readily available solution that offers a sustainable alternative, both for the immediate present where cash on hand is at a premium, and in the future, as Indian MSMEs look to grow."

However, the ongoing Russia-Ukraine war has significantly impacted India’s MSME sector with the unexpected supply chain disruption.