NEW DELHI, Jan 30: The Indian government has approved the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME), a new initiative aimed at facilitating loans of up to Rs 100 crore to eligible micro, small, and medium enterprises (MSMEs) for the purchase of plant machinery and equipment. The scheme is designed to provide 60 percent guarantee coverage by the National Credit Guarantee Trustee Company Limited (NCGTC) to member lending institutions (MLIs) for credit facilities granted to MSMEs under the MCGS-MSME program.

Under the scheme, eligible borrowers must have a valid Udyam Registration Number, and the guaranteed loan amount will not exceed Rs 100 crore. Although the project cost can be higher, at least 75 percent of the project cost must be allocated to purchasing equipment or machinery. The loan terms include a repayment period of up to 8 years for loans up to Rs 50 crore, with up to 2 years of moratorium on principal repayments. For loans exceeding Rs 50 crore, longer repayment periods and moratorium options may be considered.

An upfront contribution of 5 percent of the loan amount will be required at the time of application, with the annual guarantee fee set at zero during the year of sanction. For the subsequent three years, the guarantee fee will be 1.5 percent per annum of the outstanding loan balance, after which it will drop to 1 percent per annum.

The MCGS-MSME scheme will remain in effect for four years from the date the operational guidelines are issued or until a cumulative guarantee of Rs 7 lakh crore is issued, whichever comes first. The scheme is expected to support the growth of the manufacturing sector, which currently contributes 17 percent to the nation’s GDP and employs over 27.3 million workers.

In a statement, the Ministry of Finance emphasized that the scheme would provide a significant boost to the “Make in India” initiative, helping strengthen the country’s manufacturing sector.