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Govt launched MCGS MSME Fund to provide Free Loans upto Rs.100 crore


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On Wednesday, the government introduced a new credit guarantee scheme aimed at supporting the growth of Micro, Small, and Medium Enterprises (MSMEs) in line with the FY25 Budget announcement. The new scheme, called the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME), is designed to provide loans up to Rs 100 crore for MSMEs to purchase equipment and machinery.

Key Features of the MCGS-MSME

The scheme offers 60% guarantee coverage by the National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs) for credit facilities sanctioned to eligible MSMEs. The loans can be used for the purchase of plant and machinery, which is a significant cost for manufacturing businesses.

To qualify for the scheme, MSMEs must meet certain requirements:

  • The borrower must have a valid Udyam Registration Number.
  • The loan amount cannot exceed Rs 100 crore.
  • While the project cost may be higher, at least 75% of the project cost must be for equipment or machinery.

Guarantee Fee and Duration

Under the scheme, there will be no guarantee fee during the year the loan is sanctioned. However, for the next three years, the guarantee fee will be 1.5% per year of the outstanding loan amount as of March 31 of the previous year. After that, the fee will be reduced to 1% annually.

The scheme will remain in effect for four years from the date of the operational guidelines or until a total guarantee of Rs 7 lakh crore is issued, whichever comes first.

Boost to Manufacturing Sector

The MCGS-MSME is expected to have a significant impact on the manufacturing sector, which currently contributes about 17% to India’s GDP and employs over 27.3 million workers. The scheme is designed to facilitate easier access to credit for MSMEs, particularly for purchasing equipment and machinery. This, in turn, will support the growth of manufacturing and contribute to the ‘Make in India’ initiative.

As global supply chains shift, India’s low labor costs, abundant raw materials, and growing manufacturing expertise are positioning the country as a competitive alternative in global markets. The availability of affordable credit for plant and machinery will allow MSMEs to expand their manufacturing capacity, leading to faster industry growth.

Collateral-Free Loans for Expansion

One of the major benefits of this scheme is that it will allow collateral-free loans from banks and financial institutions. This is particularly helpful for medium-sized enterprises that may face difficulties securing traditional financing for expansion and growth.

Overall, the MCGS-MSME scheme is expected to significantly boost manufacturing in India by ensuring that MSMEs have the necessary financial support to invest in equipment and machinery, ultimately enhancing their competitiveness in both domestic and global markets.

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