Government's New MSME Credit Scheme Provides Up to INR 100 Cr Guarantee for Manufacturing Expansion Under the scheme, the National Credit Guarantee Trustee Company Limited (NCGTC) will offer a 60% guarantee coverage to Member Lending Institutions (MLIs) for credit facilities extended to MSMEs.
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The government has launched a groundbreaking Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) to bolster the manufacturing sector and foster economic growth. The scheme, introduced on Wednesday, aligns with the FY25 Budget announcement and aims to provide credit guarantee coverage of up to INR 100 crore for eligible MSMEs.
Under the scheme, the National Credit Guarantee Trustee Company Limited (NCGTC) will offer a 60% guarantee coverage to Member Lending Institutions (MLIs) for credit facilities extended to MSMEs. This initiative specifically supports the purchase of equipment and machinery, a critical aspect of scaling up manufacturing operations.
To qualify for the scheme, MSMEs must meet certain criteria, including having a valid Udyam Registration Number. The guaranteed loan amount is capped at INR 100 crore, though the overall project cost can be higher. Additionally, the cost of equipment or machinery should constitute at least 75% of the total project cost.
The scheme offers attractive financial terms for MSMEs. There will be no annual guarantee fee for the year of loan sanction. For the subsequent three years, the fee will be 1.5% per annum of the loan outstanding as of March 31 of the previous year. Thereafter, the annual fee will reduce to 1% per annum.
This credit guarantee scheme will be applicable for all loans sanctioned under MCGS-MSME for four years from the issuance of operational guidelines or until a cumulative guarantee of INR 7 lakh crore is reached, whichever comes first.
Manufacturing plays a pivotal role in India's economy, contributing 17% to the GDP and employing over 27.3 million workers. By facilitating credit access for MSMEs, the scheme is expected to accelerate manufacturing growth and contribute to the government's 'Make in India' initiative.
The finance ministry emphasised that the scheme addresses a significant industry need for credit guarantees, particularly for medium-sized enterprises. The fixed cost of plant and machinery often poses a barrier to expansion for these units. By providing collateral-free loans through banks and financial institutions, the MCGS-MSME scheme seeks to alleviate this challenge.
The global realignment of supply chains has positioned India as a viable alternative supply source, given its abundance of raw materials, low labor costs, and growing manufacturing expertise. With the increased availability of credit, manufacturing units can expand their installed capacity, fostering faster-paced growth and strengthening India's position in the global supply chain.
This strategic initiative underscores the government's commitment to empowering MSMEs and driving industrial development, ultimately paving the way for a robust and self-reliant manufacturing sector.
