In a significant boost to India’s Micro, Small, and Medium Enterprises (MSME) sector, Finance Minister Nirmala Sitharaman launched the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME), offering collateral-free loans of up to ₹100 crore. The initiative aims to provide financial support for MSMEs looking to purchase machinery and equipment, thereby enhancing manufacturing capabilities and driving economic growth.
The announcement was made during a post-budget interaction in Mumbai, where the Finance Minister also handed over sanction letters to the first eleven beneficiaries under the scheme.
Key Features of the Scheme
The MCGS-MSME is structured to offer easy credit access to MSMEs while reducing their dependence on collateral-based financing. The key highlights include:
- Loan Coverage: Loans up to ₹100 crore will be guaranteed under the scheme, although the total project cost may exceed this amount.
- Government Guarantee: The National Credit Guarantee Trustee Company Limited (NCGTC) will provide 60% guarantee coverage to Member Lending Institutions (MLIs) for loans sanctioned to eligible MSMEs.
- Eligibility: Borrowers must be registered MSMEs with a valid Udyam Registration Number.
- Loan Utilization: At least 75% of the loan amount must be allocated for the purchase of machinery or equipment.
- Repayment Terms:
- Loans up to ₹50 crore will have a repayment period of 8 years, with a 2-year moratorium on principal installments.
- Loans above ₹50 crore will have an extended repayment period, with moratorium options available.
- Duration of the Scheme: The scheme will remain in effect for four years from the issuance of operational guidelines or until a cumulative loan guarantee of ₹7 lakh crore is reached, whichever comes earlier.
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Boosting the MSME and Manufacturing Sectors
Currently, the manufacturing sector contributes 17% of India’s GDP and provides employment to over 2.73 crore workers. The introduction of the MCGS-MSME scheme is expected to:
- Strengthen domestic manufacturing capabilities.
- Improve access to credit for small and medium businesses.
- Support entrepreneurial growth by reducing financial barriers.
- Enhance India’s global competitiveness in the industrial sector.
Government’s Push for MSME Growth
The new scheme aligns with India’s broader vision of fostering self-reliance and industrial expansion. By ensuring credit availability for MSMEs, the initiative is set to enhance productivity, create employment, and drive sustainable economic development.
With this initiative, the government is reinforcing its commitment to supporting small businesses and manufacturing enterprises, paving the way for a stronger and more competitive MSME sector in India.