The Government of India has introduced the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) to enhance access to credit for Micro, Small, and Medium Enterprises (MSMEs). The scheme provides a 60% guarantee coverage through the National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs) for credit facilities up to ₹100 crore.

Key Features of the Scheme

1. Guarantee Coverage: The scheme offers a 60% guarantee on loans sanctioned by registered MLIs, which include all Scheduled Commercial Banks (SCBs), Non-Banking Financial Companies (NBFCs), and All India Financial Institutions (AIFIs).
2. Eligibility:
   1. Borrowers must be registered MSMEs with a valid Udyam Registration Number.
   1. Credit facilities up to ₹100 crore are eligible for coverage.
3. Loan Usage:
   1. The credit facilities under the scheme aim to support the purchase of plant, machinery, and equipment, fostering growth in the manufacturing sector and boosting the ‘Make in India’ initiative.
4. Project Cost:
   1. The minimum cost of equipment or machinery must constitute 75% of the project cost.
5. Repayment Terms:
   1. For loans up to ₹50 crore, the repayment period can extend up to 8 years with a moratorium period of up to 2 years for principal repayments.
   1. Loans exceeding ₹50 crore may be eligible for longer repayment schedules and moratorium periods.
6. Initial Contribution:
   1. Borrowers must make an upfront contribution of 5% of the loan amount at the time of applying for guarantee coverage.
7. Guarantee Fee:
   1. No annual guarantee fee is charged during the year of sanction.
   1. For the next three years, the guarantee fee is set at 1.5% per annum of the outstanding loan amount as of March 31 of the previous year.
   1. Subsequently, the guarantee fee will reduce to 1% per annum.

Duration and Scope

The scheme will be operational for a period of four years from the date of issue of operational guidelines or until a cumulative guarantee of ₹7 lakh crore is issued, whichever is earlier.

This initiative fulfills the 2024-25 budget announcements and is expected to significantly improve credit availability for MSMEs, drive manufacturing growth, and further the ‘Make in India’ mission.