In an effort to boost the MSME (Micro, Small and Medium Enterprises) sector, Union Finance Minister Nirmala Sitharaman has launched the Mutual Credit Guarantee Scheme (MCGS) for MSMEs. With collateral-free loans of up to ₹100 crore available, MSMEs can more easily invest in machinery and equipment to drive their growth, according to the ministry of finance.

The MSGS offers 60% guarantee coverage by the National Credit Guarantee Trustee Company Ltd (NCGTC). This means member lending institutions (MLIs) can sanction loans of up to ₹100 crore, empowering MSMEs to invest in machinery and equipment risk-free.

Key features of the scheme are:

- Loan amount guarantee shall not go beyond ₹100 crore

- Borrower needs to be an MSME with valid Udyam Registration Number

- Project cost could be higher amounts. A minimum of 75% of the project cost must go towards purchasing equipment or machinery.

- Loans of up to ₹50 crore come with a repayment window of up to 8 years, including a 2-year moratorium on principal instalments. For loans exceeding ₹50 crore, a more flexible repayment schedule and extended moratorium period on principal instalments can be tailored to suit the needs of the borrower.

- An upfront contribution of 5% of the loan amount is required at the time of applying for the guarantee cover.

- The Annual guarantee cover is zero in the year when the loan is sanctioned. For the next three years, it will be 1.5% per year of the loan balance of March 31 of the previous year. After that, the fee will reduce to 1% per year of the outstanding loan amount as of March 31.

MLIs

Nirmala Sitharaman rolls out Mutual Credit Guarantee Scheme for MSMEs