On Wednesday, January 29, 2025, the government launched a new Credit Guarantee Scheme for MSME manufacturing businesses. This scheme will be offering loans of up to ₹100 crore to the MSMEs. This had been already included in the FY25 budget and the government has launched the scheme now. So, let us understand how the scheme will work, and how will it help the manufacturing businesses in the MSMEs’ purview.
Mutual Credit Guarantee Scheme (MCGS)
This MCGS scheme aims at offering 60% guarantee coverage of credit facilities up to ₹100 crore by National Credit Guarantee Trustee Company Limited (NCGTC). This will be offered to the Member Lending Institutions (MLIs) who will be offering the credit facility to the MSMEs. The credit facility can be availed for the purchase of machinery and other equipment as per guidelines by the finance ministry.
The guarantee fee annually on these loans under this MCGS will be zero for the first year in which the loan is sanctioned. For the loans outstanding on 31 March of the previous year, the fee will be 1.5% p.a. for the upcoming three years and the fee will be 1%.
This will apply to every loan which was sanctioned under this scheme during the four years after the announcement of the operational guidelines of the scheme or until ₹7 lakh crore are issued as a cumulative guarantee, whichever is earlier.
Eligibility Criteria
The MSMEs which want to avail of this scheme must fulfil the following criteria –
- The MSME must have a valid Udyam Registration Number
- The loan amount guaranteed must not go beyond ₹100 crore
- The project cost can be of a higher sum
- Minimum cost of machinery or other equipment required for the project must be 75% of the total project cost
Massive Boost for Manufacturing Sector
Currently, the manufacturing sector of India makes up around 17% of the national GDP and offers jobs to a whopping 27.3 million people. This Mutual credit guarantee scheme can further boost the manufacturing sector by making credit easily available to the MSMEs. This can be a great boost for the ‘Make in India’ mission of the government as well.
As India is emerging as one of the most prominent destinations for supply sources for the entire world, because of its resources, nominal labour charges, increasing understanding of manufacturing expertise, and also growing entrepreneurial experiences, this credit guarantee scheme for the manufacturing sector has come at the right time.
For the MSMEs, buying machinery, and equipment has always been a major challenge, and with this credit facility, they can overcome that. With the credit line under the Credit Guarantee Scheme, they can expand their businesses and that can add to the national income and GDP as well. This is why these schemes have been introduced so that the MSMEs can expand and these loans are also collateral-free so that there will be no additional burden on the MSMEs to arrange for collaterals.
Source: CNBC TV18
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