Mutual Credit Guarantee Scheme approved to boost MSME manufacturing

To further strengthen MSME credit access, the government aims to facilitate Rs 7 lakh crore in cumulative guarantees over the next four years.

Centre has approved the Mutual Credit Guarantee Scheme, announced in the Budget 2024-25, to enhance credit access for MSME manufacturing.

Under this scheme, loans of up to Rs 100 crore for plant and machinery purchases will now be eligible for 60% guarantee coverage. Banks and lenders will receive a 60% guarantee for MSME loans up to Rs 100 crore, ensuring reduced risk and improved funding availability.

The scheme also provides a repayment period of up to eight years, with a two-year moratorium for loans up to Rs 50 crore. To further strengthen MSME credit access, the government aims to facilitate Rs 7 lakh crore in cumulative guarantees over the next four years.

The manufacturing sector forms 17% of India's GDP and employs over 2.73 crore workers.

The government now aims to take the share of manufacturing to 25% of GDP, and the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) is expected to facilitate the availability of credit for purchase of machinery or Equipment by MSMEs, giving a boost to manufacturing and the Make in India mission.

Loan of upto Rs 50 crore under the Scheme shall have repayment period of upto 8 years, with upto 2 years moratorium period on principal instalments. For loans above Rs 50 crore, higher repayment schedule and moratorium period on principal instalments can be considered. Upfront contribution of 5% of the loan amount shall have to be deposited at the time of application of guarantee cover.