Government Doubles Micro Enterprise Card Target to Boost SME Working Capital

The Indian government is significantly ramping up efforts to support micro-enterprises by asking banks to double their target for issuing Micro Enterprise Cards (ME-Cards) in the current fiscal year. The initial objective was to issue one million cards, but the revised directive aims to ensure that at least 20 million eligible micro units benefit from faster access to working capital credit. A model scheme for these micro credit cards has been finalized, and banks are currently assessing eligible borrowers.

The ME-Card scheme, announced in the FY26 budget, is a tailored credit card designed to provide micro, small, and medium enterprises (MSMEs) registered on the Udyam portal with easier access to working capital. Each ME-Card comes with a credit limit of up to ₹5 lakh. The government anticipates that this initiative will lead to an additional disbursement of ₹25,000-30,000 crore to the MSME segment.

To expedite the process, banks are working towards common features and eligibility criteria. The entire process, from application to loan disbursement, will be digital, employing simpler assessment models that rely on digital verification of bank statements and the Account Aggregator framework. This bypasses the traditional requirement for detailed financial statements or collateral.

Impact: This strategic move by the government is poised to inject much-needed liquidity into the micro-enterprise sector. By simplifying credit access and reducing procedural hurdles, it empowers smaller businesses to manage their working capital efficiently, track expenses, and improve their financial discipline. This could lead to enhanced business operations, potential expansion, and job creation within the vital MSME segment. Rating: 8/10

Difficult Terms: - Micro Enterprise Cards (ME-Cards): A specialized credit card for micro-enterprises to facilitate quick access to funds for operational needs. - Working Capital Credit: Funds used by a business for its day-to-day operational expenses, such as salaries, rent, or inventory. - Udyam portal: A government platform for registering Micro, Small, and Medium Enterprises (MSMEs) in India. - FY26 budget: Refers to the budget presented for the Financial Year 2025-2026. - MSMEs: Micro, Small, and Medium Enterprises, a critical sector of the economy. - Account Aggregator (AA) framework: A system allowing secure sharing of financial data from various sources with consent. - Collateral: An asset pledged as security for a loan, which can be seized if the borrower defaults.