The GoI has approved the introduction of the Mutual Credit Guarantee Scheme for MSMEs (MCGS- MSME) for providing 60% guarantee coverage by National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs) for credit facility up to Rs 1 billion sanctioned to eligible MSMEs under MCGS-MSME for purchase of equipment/machinery.
The scheme requires that the borrower be a MSME with a valid Udyam Registration Number. The maximum loan amount guaranteed under the scheme shall not exceed Rs 1 billion, though the project cost itself can be higher. A minimum of 75% of the project cost must be allocated to equipment or machinery. Loans up to Rs 500 million will have a repayment period of up to eight years, including a moratorium of up to two years on principal installments. For loans exceeding Rs 500 million, a longer repayment schedule and moratorium period may be considered. An upfront contribution of 5% of the loan amount must be deposited at the time of applying for the guarantee cover. The annual guarantee fee is waived for the sanction year. For the following three years, it will be charged at 1.5% per annum of the outstanding loan as of March 31 of the previous year, after which it will be reduced to 1% per annum.
The scheme will be applicable to all loans sanctioned under MCGS-MSME during 4 years from the date of issue of operational guidelines of the scheme or till a cumulative guarantee of Rs. 7 lakh crore is issued, whichever is earlier.
Manufacturing sector currently comprises 17% of the nation’s GDP and over 27.3 million workers. The Prime Minister has given a call for ‘Make in India, Make for the World’ and has signalled that India is ready and keen to increase the share of manufacturing to 25% of GDP. MCGS-MSME is expected to facilitate the availability of credit for the purchase of plant and machinery/equipment by MSMEs and give a major boost to manufacturing and thereby to Make in India, the Ministry of Finance stated in a press release.
