By:- MSMEs from Madhur Kumar, Chief General Manager MSME Banking, Co-Lending, and Supply Chain Finance, Bank of Baroda

“Union Budget 2026 signals a clear shift toward structural strengthening of MSME financing, with banks placed at the centre of execution. The most significant intervention is the deepening of TReDS, including mandatory routing of CPSE MSME payments and enhanced credit guarantees for invoice discounting.

From a banking perspective, this improves cash-flow visibility, shortens working-capital cycles, and enables safer, receivable-backed lending rather than collateral-heavy approaches.

Also the proposed ₹10,000 crore SME Growth Fund complements traditional bank credit by addressing the equity gap for scalable MSMEs. This is positive for banks as better-capitalised enterprises typically demonstrate stronger repayment capacity and lower credit risk, creating opportunities for long-term lending and cross-sell. Expanded credit guarantee coverage further strengthens lender confidence, particularly for micro and small enterprises, supporting both growth and priority sector objectives.

The Budget also reinforces data-led credit delivery, with integration across platforms such as GeM, GST, and TReDS, allowing banks to sharpen underwriting, pricing, and early-warning mechanisms. Overall, Budget 2026 moves MSME banking from volume-driven lending to cash-flow-based, digitally enabled, and risk-calibrated financing, while placing strong emphasis on formalisation, resilience, and sustainable growth of the MSME ecosystem.”