Mutual credit guarantee scheme for MSMEs gets Finance Ministry nod

New Delhi: The government on Wednesday approved the Mutual Credit Guarantee Scheme for micro, small and medium enterprises (MCGS-MSMEs), guaranteeing loans up to ₹100 crore.

In a statement, finance ministry said that the scheme is expected to facilitate the availability of credit for the purchase of plant and equipment and machinery by MSMEs and give a boost to manufacturing. The scheme was announced in the budget for 2024-25.

“The scheme will facilitate collateral-free loans by banks and financial institutions to MSMEs that are in need of debt capital for their expansion and growth,” it said, noting that with the availability of credit to expand the installed capacity of manufacturing units, manufacturing would grow at a faster pace.

The scheme provides for 60% guarantee coverage by the National Credit Guarantee Trustee Company Limited (NCGTC) to banks and financial institutions for credit facilities of up to ₹100 crore sanctioned to eligible MSMEs.

“Loans of up to ₹50 crore under the scheme shall have a repayment period of up to eight years with up to a two-year moratorium period on principal instalments. For loans above Rs 50 crore, a higher repayment schedule and moratorium period on principal instalments can be considered,” the ministry said.