PHDCCI seeks 180-day NPA window for MSMEs, higher MUDRA loan limits | Economy & Policy News

The PHD Chamber of Commerce and Industry (PHDCCI) has proposed extending the overdue period for classifying loans to micro, small and medium enterprises (MSMEs) as non-performing assets (NPAs) from 90 days to 180 days, alongside higher loan limits under the Pradhan Mantri MUDRA Yojana (PMMY), as part of its pre-Budget recommendations for 2027-28.

 

The industry body has argued that the longer classification window would provide relief to small businesses facing extended working capital cycles and delays in receiving payments, while helping them maintain access to institutional credit.

 

Under the existing framework, a loan is generally classified as an NPA when principal or interest remains overdue for more than 90 days. PHDCCI wants this period extended to 180 days to account for the cash-flow constraints faced by smaller enterprises.

  

The chamber has also proposed increasing the loan ceilings under PMMY to ₹1 lakh for the Shishu category, ₹10 lakh for Kishore and ₹20 lakh for the Tarun and Tarun Plus categories to reflect rising project costs.

 

PMMY, launched in April 2015, provides collateral-free institutional credit to micro enterprises. According to the chamber’s submission, more than 2.54 crore loans worth ₹3.43 trillion had been sanctioned under the scheme as of November 2026 (provisional), of which ₹3.32 trillion had been disbursed.

 

PHDCCI has further called for direct government equity investment in MSMEs through the Fund of Funds Scheme, with dedicated allocations for start-up seed capital and participation in small and medium enterprise (SME) initial public offerings (IPOs).

 

It has also sought stronger implementation of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme, which facilitates collateral-free lending to eligible micro and small businesses. The chamber has proposed stricter compliance by banks and a centralised portal to track loan applications and monitor reasons for rejection.

 

MSMEs contribute around 31 per cent to India’s gross domestic product (GDP), account for 48.58 per cent of total exports and generate approximately 35.4 per cent of manufacturing output, according to PHDCCI. The sector comprises more than 7.47 crore enterprises and provides livelihoods to around 32.8 crore people.

 

In another set of pre-Budget recommendations, PHDCCI has sought an increase in basic customs duty on specified categories of imported paper and paperboard from 10 per cent to 25 per cent to protect domestic manufacturers from import competition.

 

The proposal covers products under six Harmonised System (HS) headings — 4802, 4803, 4804, 4805, 4808 and 4810. The chamber has also sought restrictions on specified paper imports through an actual-user licensing framework and mandatory Bureau of Indian Standards (BIS) certification and Quality Control Orders (QCOs).

 

To address raw material constraints, it has proposed customs duty exemptions on imports of specified wood chips and logs used in paper and paperboard manufacturing, subject to actual-user conditions.

 

The recommendations come against the backdrop of high capacity utilisation in the domestic paper industry. According to the Indian Paper Manufacturers Association (IPMA), member mills operated at around 97 per cent of installed capacity in FY26, producing 5.208 million tonnes against a capacity of 5.368 million tonnes.