New Delhi: MSME Fintech expects that the government should enable initiatives and policies that facilitate the seamless flow of resources, particularly capital, to the sector
Ahead of the Interim Budget 2024 presentation, Hardika Shah, Founder & CEO, Kinara Capital has said that some of the key areas that require immediate attention and can have a profound impact on the MSME sector are, reinstating the tax rebate for Foreign Portfolio Investors (FPIs) and removing the cap on the CGTMSE Scheme to enable last-mile MSME financial inclusion.
“Recently, the government removed the tax rebate extended to FPIs on interest earned on bonds. The 5% tax rate on interest was hiked to 20%. This rise in tax rate is likely to raise borrowing costs by 30-40 basis points for MSME lenders, which in turn, can lead to a liquidity crunch. Restoring the earlier regime will ensure that the cost of borrowing remains unaffected, enabling fintech NBFCs focused on MSMEs lending to bolster capital access for the sector,” Shah said.
He added that the CGTMSE cap was revised to allow for MSME loans to have interest rates not exceeding 21% per annum in 2023.
“While this is an improvement from the previous cap of 18%, it still excludes MSMEs that require unsecured small-ticket loans, restricting financial inclusion at the last mile. A reconsideration of the interest rate cap and guarantee cover under the CGTMSE scheme is essential to enable the scheme to deliver its full potential,” Shah said.
“Funding challenges persist in the start-up sector, and while there might not be significant start-up-specific support, the introduction of sector-specific initiatives (e.g., FAME III) would be welcome,” Ratish Pandey, Founder and Business Coach, Ethique Advisory said.
“Considering the current state of the Indian economy’s recovery, the Union Budget 2024–25 would be crucial to the Consumer Electronics industry, acting as a possible impetus for its successful rebirth. Large manufacturing companies and micro, small, and medium-sized businesses (MSMEs and SMEs) are looking forward to the upcoming budget because they believe it will help them continue on their current growth trajectory,” said Mandeep Arora, Managing director & co-founder, UBON.