FISME Welcomes Mutual Credit Guarantee Scheme For MSMEs For Collateral Free Loans Upto Rs. 100 Crore

New Delhi, Jan 30 (KNN) The government has approved the Mutual Credit Guarantee Scheme (MCGS) for Micro, Small & Medium Enterprises (MSMEs). The announcement comes just days before the Union Budget 2025, fulfilling a commitment made in the previous fiscal year's budget presentation.

The scheme introduces substantial support for manufacturing MSMEs, offering 60 percent guarantee coverage on loans up to Rs 100 crore specifically designated for acquiring plant, machinery, and equipment.

The Ministry of Finance has confirmed that eligible enterprises must possess a valid Udyam Registration Number to access these credit facilities.

Under the program's framework, MSMEs can secure loans with comprehensive terms tailored to different scales of operation. For loans up to Rs 50 crore, businesses can benefit from an eight-year repayment window, including a two-year moratorium on principal payments.

The scheme mandates that a minimum of 75 percent of the project cost must be allocated to equipment or machinery purchases.

The financial structure includes an upfront contribution requirement of 5 percent of the loan amount at the guarantee application stage.

To ease the initial burden, the guarantee fee is waived for the first year, followed by a 1.5 percent annual fee for the subsequent three years, eventually reducing to 1 percent per annum thereafter.

Federation of Indian Micro and Small & Medium Enterprises (FISME) has welcomed the treen signal finally given to the scheme by eth Government.

“FISME stressed upon Minister the grave need for funds foe technological upgradation during last pre-budget consultations with Finance. MSME sector has been awaiting for announcement of details of the scheme announced during last budget. We are happy that the scheme has seen light of the day”, says Anil Bhardwaj, Secretary General FISME.  

‘However keeping in view that the guarantee coverage is limited to 60%, it is to be seen how the banks would take it up”,  he opined.   

The Finance Ministry emphasises that this initiative aligns with Prime Minister's vision of 'Make in India, Make for the World,' targeting a increase in manufacturing's contribution to GDP from the current 17 percent to 25 percent.

The sector presently employs over 27.3 million workers, and the scheme aims to further strengthen this foundation.

India's position as an emerging manufacturing hub is particularly relevant as global supply chains undergo realignment, with the country's abundant resources, competitive labour costs, and growing manufacturing expertise making it an attractive destination for industrial investment.

The MCGS-MSME will remain operational for four years or until reaching a cumulative guarantee of Rs 7 lakh crore, whichever occurs first.

This collateral-free loan scheme addresses a crucial industry need, potentially catalysing significant expansion in manufacturing capabilities and contributing to broader economic growth.

(KNN Bureau)