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- The Government of India has introduced the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME), aiming to ease credit constraints and propel growth in the manufacturing sector.
About:
- The Micro, Small, and Medium Enterprise (MSME) sector forms the backbone of the Indian economy, contributing significantly to employment, innovation, and economic growth.
- Within the MSME landscape, the manufacturing sector plays a crucial role, accounting & providing jobs to 27.3 million workers.
- However, access to finance remains a major hurdle for MSME manufacturers, hindering their ability to modernize, expand, and compete effectively.
Key Features of MCGS-MSME:
- Guarantee Coverage: The scheme offers 60% guarantee coverage to Member Lending Institutions (MLIs) on loans up to ₹100 crores sanctioned to eligible MSMEs for the purchase of plant and machinery.
- Eligibility: MSMEs with a valid Udyam Registration Number.
- Loan Amount and Usage: A minimum of 75% of the project cost must be utilized for the acquisition of equipment and machinery, directly supporting manufacturing capacity expansion.
- Repayment Terms (Up to ₹50 crores) Maximum 8-year repayment, with a 2-year principal moratorium.
- Above ₹50 crore: Longer repayment and moratorium periods may be considered.
- Guarantee Fees: No guarantee fee is charged in the first year. For the subsequent three years, the fee is 1.5% per annum of the outstanding loan amount as of March 31st of the previous year.
- Scheme Duration: The MCGS-MSME will be in effect for four years from the date of the issuance of operational guidelines or until cumulative guarantees of ₹7 lakh crores are issued, whichever comes earlier.
- Participating Lenders: All Scheduled Commercial Banks (SCBs), NBFCs registered with the National Credit Guarantee Trustee Company Limited (NCGTC).
Impact on MSME & Manufacturing
- Supports ‘Make in India & Make for the World’ by increasing manufacturing output.
- Helps MSMEs scale up with easier access to large credit for expansion.
- Strengthens India’s position as a global alternative in supply chains.
- Aims to increase manufacturing’s share in GDP from 17% to 25%.
- Expanded MSMEs generate more employment opportunities.
Other Key MSME Financial Support Schemes in India
- CGTMSE (Credit Guarantee Fund Trust for MSEs): Offers collateral-free loans up to ₹2 crores. Provides up to 85% guarantee coverage to reduce lender risk.
- TReDS (Trade Receivables Discounting System): Online platform for MSMEs to get payments faster from large companies.
- Emergency Credit Line Guarantee Scheme (ECLGS): ₹3 lakh crores relief package during COVID-19. 100% Government-backed guarantee for loans.
- RBI Measures to Boost MSME Lending: Priority Sector Lending (PSL): Banks mandated to allocate a portion of their loans to MSMEs.
- Restructuring of MSME Loans: RBI allowed one-time loan restructuring for stressed MSMEs to prevent defaults.
Source : https://www.nextias.com/ca/current-affairs/30-01-2025/msmes-credit-guarantee-scheme
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