Enhancement in Guarantee Cover With Reduction In Fees For MSMEs

New Delhi, Mar 25 (KNN) In a significant move to support the growth and sustainability of Micro and Small Enterprises (MSEs), the Government of India has announced enhancements to the Credit Guarantee Scheme (CGS-I).

Effective from April 1, 2025, the credit guarantee coverage limit has been increased from Rs 5 crore to Rs 10 crore. Additionally, the Annual Guarantee Fee (AGF) structure has been rationalised to reduce the financial burden on MSMEs.

As per Circular No. 250/2024-25 issued by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), the credit guarantee ceiling for banks has been doubled from Rs 5 crore to Rs 10 crore.

This decision aligns with the government’s commitment to enhancing credit accessibility and supporting the MSME sector. The revised guidelines will apply to new guarantees and working capital enhancements approved on or after April 1, 2025.

To further ease credit costs for MSMEs, the AGF rates have been revised under Circular No. 251/2024-25. The new rates are as follows: Up to Rs 10 lakh – 0.37 per cent per annum, Rs 10 lakh to Rs 50 lakh – 0.55 per cent per annum, Rs 50 lakh to Rs 1 crore – 0.60 per cent per annum, Rs 1 crore to Rs 2 crore – 0.85 per cent per annum, Rs 2 crore to Rs 5 crore – 1 per cent per annum, Rs 5 crore to Rs 8 crore – 1.1 per cent per annum, and Rs 8 crore to Rs 10 crore – 1.2 per cent per annum.

These reduced AGF rates are expected to make credit guarantees more affordable, further strengthening the financial health of MSMEs.

Additionally, the Ministry of Micro, Small, and Medium Enterprises has updated the MSME classification criteria under Notification S.O. 1364(E).

The new thresholds, effective April 1, 2025, redefine investment and turnover limits, enabling more enterprises to benefit from government schemes.

These initiatives reflect the government’s continuous efforts to foster MSME growth by ensuring better access to finance and reducing credit costs.

MSMEs are encouraged to leverage these changes to expand their businesses and contribute to economic development. For further details, stakeholders are advised to refer to the official circulars.

(KNN Bureau)