India Plans New Credit Guarantee Scheme For MSMEs, Covering Loans Up To Rs 100 Crore

New Delhi, Jan 9 (KNN) Financial Services Secretary M Nagaraju announced on Thursday that the government is preparing to launch a comprehensive credit guarantee scheme for the Micro, Small and Medium Enterprises (MSME) sector, which will cover loans up to Rs 100 crore.

Speaking at the concluding session of Grameen Bharat Mahotsav, Nagaraju revealed that existing enterprises would be eligible for loans without requiring traditional guarantees under this new initiative.

The scheme, originally unveiled by Finance Minister Nirmala Sitharaman in the 2024-25 Budget, is awaiting Cabinet approval. According to the Finance Minister's budget announcement, the program will operate through a pooling mechanism for credit risks and will be managed by a self-financing guarantee fund.

This initiative aims to facilitate term loans for MSMEs to purchase machinery and equipment without requiring collateral or third-party guarantees, though borrowers will need to pay both an upfront guarantee fee and an annual fee based on the declining loan balance.

The MSME sector has demonstrated remarkable growth and resilience in recent years, with exports surging from Rs 3.95 lakh crore in 2020-21 to Rs 12.39 lakh crore in 2024-25.

The sector currently employs 50 million people and has maintained a significant contribution to India's GDP, with its Gross Value Added (GVA) increasing from 29.7 percent in 2017-18 to 30.1 percent in 2022-23.

Nagaraju emphasised the government's commitment to rural entrepreneurship through various lending schemes.

He outlined four key focus areas for the country's progress including quality improvement, export linkage development, capacity building, and support mechanisms to achieve the vision of Vikshit Bharat.

These initiatives align with the government's broader strategy to strengthen India's MSME sector and enhance its global competitiveness.

(KNN Bureau)