Boosting MSMEs: New Credit Scheme Launched

Finance Minister Nirmala Sitharaman introduced the Mutual Credit Guarantee Scheme to aid MSMEs with collateral-free loans up to Rs.100 crore for machinery purchases, aiming to enhance manufacturing. This initiative was part of the 2024 Budget promises, focusing on 'Make in India' and economic growth.

Finance Minister Nirmala Sitharaman unveiled the Mutual Credit Guarantee Scheme for MSMEs on Monday to facilitate loans up to Rs.100 crore without collateral for Micro, Small, and Medium Enterprises (MSMEs) purchasing machinery and equipment. As promised in the July 2024 Budget, this initiative aims to bolster the manufacturing sector.

In a post-budget interaction event in Mumbai, the finance minister presented sanction letters to the first eleven beneficiaries under this scheme. This credit guarantee scheme is designed to support MSMEs in acquiring machinery, with financing unsecured by collateral or third-party guarantees, ensuring easier access to capital for SMEs.

The government has approved the Mutual Credit Guarantee Scheme, providing a 60 percent guarantee coverage by the National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs). This facility is available for credits up to Rs.100 crore for eligible MSMEs under the scheme, facilitating equipment purchases.

Under this scheme, loans up to Rs.50 crore will have an 8-year repayment term with up to a 2-year moratorium on principal payments. Loans exceeding Rs.50 crore may entertain extended repayment and moratorium periods. A 5 percent upfront contribution of the loan amount is required upon applying for guarantee cover.

The scheme's annual guarantee fee will be waived in the sanction year, followed by a fee of 1.5 percent per annum for the next three years and 1 percent thereafter. Applicable to loans sanctioned within four years of the operational guidelines' release, the scheme aims to issue a cumulative Rs.7 lakh crore in guarantees.

With the manufacturing sector composing 17 percent of GDP and employing 27.3 million, Prime Minister Narendra Modi emphasizes the 'Make in India, Make for the World' initiative, pushing to raise manufacturing GDP share to 25 percent. The MCGS-MSME is set to improve credit access for MSMEs, boosting manufacturing and supporting economic strategies like 'Make in India.' (ANI)