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The Union Government has approved the Mutual Credit Guarantee Scheme for Micro, Small, and Medium Enterprises (MCGS-MSMEs).

About the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME)

The initiative is designed to strengthen the manufacturing sector by providing credit support to Micro, Small, and Medium Enterprises (MSMEs).

The scheme offers a 60% guarantee coverage on loans up to ₹100 crore, which are sanctioned to eligible MSMEs for the purchase of plant and machinery or equipment.

This guarantee is provided by the National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs), such as Scheduled Commercial Banks, Non-Banking Financial Companies, and All India Financial Institutions.

Key Features of the Scheme:

• Eligibility: The borrower must be an MSME with a valid Udyam Registration Number.
• Loan Amount: The guaranteed loan amount does not exceed ₹100 crore, though the project cost can be higher.
• Equipment Cost: At least 75% of the project cost must be allocated for the purchase of machinery or equipment.
• Repayment Period: For loans up to ₹50 crore, the repayment period is up to 8 years, with a moratorium of up to 2 years on principal installments. For loans above ₹50 crore, the repayment schedule and moratorium period can be extended.
• Upfront Contribution: Borrowers must deposit 5% of the loan amount as an upfront contribution when applying for the guarantee cover.
• Guarantee Fee: No annual guarantee fee is charged during the sanction year. For the next three years, the fee is 1.5% per annum of the outstanding loan amount as of March 31 of the previous year. After that, it reduces to 1% per annum.
• Scheme Duration: The scheme will remain applicable for four years from the date of its operational guidelines or until cumulative guarantees of ₹7 lakh crore are issued, whichever comes first.

Potential Impact of the Scheme

The MCGS-MSME is expected to significantly boost the manufacturing sector, which currently contributes 17% to India’s GDP and employs over 27.3 million workers.

By promoting collateral-free loans for the purchase of machinery and equipment, the scheme aligns with “Make in India, Make for the World” to increase the manufacturing sector’s contribution to 25% of GDP.

It also aligns with India’s goal of becoming a $5 trillion economy by promoting a robust and self-reliant manufacturing ecosystem.

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Source: 

PIB