Bank credit could get a fillip over the next few years as the Union Budget for FY25 has proposed a host of measures, including increase in Kisan Credit Card (KCC) limit to .₹5 lakh (from ₹3 lakh), introduction of customised credit cards with a ₹5 lakh limit for micro enterprises and doubling of credit guarantee cover for loans extended to Micro and Small Enterprises (MSEs) to ₹10 crore, among others.

These announcements come in the backdrop of the GDP growth sliding to a seven-quarter low of 5.4 per cent in the second quarter of FY25 against 6.7 per cent in Q1FY25 and moderation in non-food credit growth of scheduled commercial banks to 12.4 per cent in December 2024 as compared to 15.8 per cent in December 2023.

Finance Minister Nirmala Sitharaman, in her FY26 Union Budget speech, said the enhancement in credit through KCC will facilitate short term loans for 7.7 crore farmers, fishermen, and dairy farmers.

Customised Credit Cards

Further, Banks will issue customised credit cards with a ₹5 lakh limit for micro enterprises registered on Udyam portal. In the first year, 10 lakh such cards will be issued. Udyam portal provides these enterprise links to various facilities such as access to markets, access to credit, subsidy, etc.

TSitharaman said a new scheme for 5 lakh first-time entrepreneurs, including women, Scheduled Castes and Scheduled Tribes, will be launched to provide term loans up to ₹2 crore during the next 5 years.

The Budget proposed a doubling of guarantee cover for micro and small enterprises (MSEs) and start-ups to ₹10 crore and ₹20 crore, respectively, thereby encouraging banks to extend credit to these segments. Further, for exporter MSMEs, guarantee cover will be available for Term Loans up to ₹20 crore.

PM SVA (Street Vendors Atmanirbhar) Nidhi will be revamped with enhanced loans from banks, UPI linked credit cards and capacity building support even as the ‘Grameen Credit Score’ framework to serve the credit needs of SHG members and people in rural areas.

‘Bank loan growth’

Banking expert V Viswanathan said the Union Budget measures may spur bank loan growth and there by economic growth.

“Personal income tax revision with no tax up to ₹12 lakh earnings and reduced tax slabs for others will leave more income in the hands of individuals. So, their loan eligibility also goes up along with more money available to spend,” he said.

Jiji Mammen, Executive Director and CEO, Sa-Dhan, observed that the Gramin Credit Score framework for Self-Help Groups (SHGs) is a good idea.

“The framework will help better credit discipline in microfinance and weed out fraudulent borrowers. Also, the new scheme to be launched for five lakh women, first time entrepreneurs for term loans for next five years and enhanced Credit Guarantee Scheme for startups will augment the demand for Microfinance, particularly in rural and semi-urban regions,” he said.

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