India approves Mutual Credit Guarantee Scheme for MSME

03 Feb 2025 CW Team

The Indian government recently approved introduction of Mutual Credit Guarantee Scheme for micro, small and medium enterprises (MCGS-MSME scheme) to provide 60-per cent guarantee coverage by National Credit Guarantee Trustee Company Limited (NCGTC) to member lending institutions (MLIs) for credit facility up to Rs 1 billion ($11.55 million) for purchase of equipment and machinery.

The scheme is expected to give a major boost to manufacturing and the ‘Make in India’ initiative, a release from the ministry of finance said.

The borrower should be an MSME with valid Udyam registration number and minimum cost of equipment and machinery should be three-fourths of the project cost. For loans above that, higher repayment schedule and moratorium period on principal instalments can be considered.

Annual guarantee fee on loan under the scheme shall be zero during the year of sanction. During the next three years, it shall be 1.5 per cent of loan outstanding as on March 31 of the preceding year; thereafter, the annual guarantee fee shall be 1 per cent.

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