The Indian government has sanctioned the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) to promote credit availability for the manufacturing industry. This project offers 60% guarantee cover for loans of up to ₹100 crore, enabling MSMEs to invest in plant and machinery without significant financial barriers.
Under this scheme, MSMEs that are eligible and possess a valid Udyam Registration Number can obtain loans mainly for buying equipment and machinery. For the proper utilization, at least 75% of the project expense should be used for such procurements. The government has made the repayment system easier to avoid financial strain on companies. Up to ₹50 crore loans will have a repayment tenure of up to eight years with a two-year moratorium on principal repayment. For loans above ₹50 crore, a longer repayment plan may be extended as per requirements. Borrowers will also be required to furnish an upfront contribution of 5% of the loan amount at the time of applying for the guarantee cover.
One of the major attractions of the scheme is the exemption of the Annual Guarantee Fee in the first year. In the second to fourth year, there will be an annual fee of 1.5% on the outstanding loan amount, which will subsequently come down to 1% from the fifth year onwards. The scheme will continue for four years from the release date of its operational guidelines or until ₹7 lakh crore of guarantees are issued.
Since MSMEs are the backbone of India’s economy, contributing 17% to the GDP and employing more than 27.3 million people, this scheme is likely to give a major boost to the sector. The scheme is in line with the government’s “Make in India, Make for the World” vision and aims to raise the contribution of the manufacturing sector to GDP to 25%. By facilitating easier credit availability, the scheme is likely to promote business growth, employment generation, and overall industrial development, making India a major player in global supply chains.
Disclaimer: The information provided is for educational purposes only and does not constitute financial advice. We are not registered financial advisors. Please conduct your own research and consult a qualified advisor before making investment decisions. Any investment decisions you make based on this information are solely at your own risk.
Also read: Tata Motors Posts Mixed Q3 FY25 Results Despite Supply Chain Improvements
Published on: January 29, 2025 at 10.00 PM GMT.
As stated in Bhagavad Gita : (Bhagavad Gita 18.78)
यत्र योगेश्वरः कृष्णो यत्र पार्थो धनुर्धरः।
Wherever there is Lord Krishna, the master of yoga, and Arjuna, the supreme archer, there also is victory.
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