India's MSME’s Latest Reforms: Boosting Formalization and Credit

The Government of India’s Ministry of Micro, Small, and Medium Enterprises (MSME) has unveiled new enhancements and measures to further empower the MSME sector, supplementing earlier initiatives. These updates reflect the Ministry’s drive to foster formalization, financial strength, and sectoral inclusion.

Key New Measures and Updates

Expansion of Udyam Assist Platform (UAP) for Informal Micro Enterprises

A significant recent step is the establishment of the Udyam Assist Platform (UAP), specifically designed to bring Informal Micro Enterprises (IMEs) into the formal sector. By doing so, these enterprises become eligible for Priority Sector Lending (PSL) benefits, acknowledging the vital role of informal businesses and broadening access to formal financing and support mechanisms.

Inclusion of Retail and Wholesale Traders as MSMEs

For the first time, effective from 2 July 2021, retail and wholesale traders are officially recognized as MSMEs. This move expands the MSME umbrella to a vast segment of the Indian economy, providing them with access to government-backed schemes and institutional support, which was previously unavailable.

Enhanced Credit Guarantee and Collateral-Free Loans

In the latest update, the Credit Guarantee Scheme has been strengthened with an infusion of ₹9,000 crore. From 1 April 2025, Micro and Small Enterprises can avail themselves of collateral-free loans up to ₹10 crore, with guarantee coverage up to 90%, under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). This is a major increase in credit support, aiming to unlock capital for high-potential enterprises and catalyze growth.

New Trade Receivables Discounting System (TReDS) Structure

To tackle the persistent challenge of delayed payments, the Ministry has implemented TReDS- a digital system to expedite financing for MSMEs’ trade receivables from corporates, government departments, and PSUs. The system increases liquidity, reduces working capital stresses, and promotes timely settlements within the sector.

Expanded PMEGP Project Cost Limits

The Prime Minister’s Employment Generation Programme (PMEGP) now features higher maximum project cost limits: from ₹25 lakh to ₹50 lakh for manufacturing and from ₹10 lakh to ₹20 lakh for services. This enhanced cap broadens opportunities for MSMEs to launch larger, more ambitious ventures under this scheme.

Impressive Uptake in MSME Registrations

Between 1 July 2020 and 31 July 2025, a total of 6.63 crore MSMEs have registered through the Udyam Registration Portal and Udyam Assist Platform, demonstrating the widening reach and effectiveness of the Ministry’s efforts at formalization and inclusivity.

These recent advancements supplement previously introduced support tools and mark a crucial evolution in the MSME support landscape, offering more inclusive access, stronger credit options, expanded eligibility criteria, and enhanced project financing, all contributing to the sustained growth and resilience of India's micro, small, and medium enterprise sector.