Government Approves Mutual Credit Guarantee Scheme for MSME Manufacturing Sector

Government Approves Mutual Credit Guarantee Scheme for MSME Manufacturing Sector

The Government of India has recently approved the introduction of the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) to provide 60% guarantee coverage by the National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs).

MLIs include financial institutions such as commercial banks and non-banking financial companies (NBFCs) registered with NCGTC under this scheme.

Key Features of MCGS-MSME:

• Eligible Borrowers: MSMEs with a valid Udyam Registration Number.
• Loan Coverage: Up to ₹100 crore per MSME for purchasing plant and machinery/equipment.
  • The project cost can exceed ₹100 crore, but at least 75% must be allocated to machinery/equipment.
• Repayment Terms:
  • For loans up to ₹50 crore: Repayment period of up to 8 years, including a 2-year moratorium on the principal.
  • For loans above ₹50 crore: Longer repayment and moratorium options may be considered.
• Scheme Duration: The scheme will run for 4 years from the issuance of operational guidelines or until a cumulative guarantee of ₹7 lakh crore is issued.

Other Steps to Ease Credit Access for MSMEs:

• Credit Guarantee Fund Trust for Micro and Small Enterprises: Provides collateral-free loans to MSEs.
• Raising and Accelerating MSME Performance (RAMP) Program: A ₹6,000 crore investment over 5 years to boost MSME growth.
• Priority Sector Lending (PSL) Norms: All bank loans to MSMEs that meet the prescribed conditions qualify for classification under priority sector lending.

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