The Union government is set to introduce a new credit guarantee scheme aimed at supporting Micro, Small, and Medium Enterprises (MSMEs) in India. The scheme, which will cover loans up to ₹100 crore, was announced by Financial Services Secretary M. Nagaraju on Thursday during the concluding day of the Grameen Bharat Mahotsav.
Nagaraju explained that the scheme, initially mentioned by Finance Minister Nirmala Sitharaman in the Union Budget 2024-25, will allow MSMEs to access loans without the need for a guarantee, provided they are already operating as enterprises. He added that the proposal will soon be presented to the Union Cabinet for approval.
The MSME sector plays a crucial role in India’s economy, employing around 50 million people. The new scheme aims to make it easier for these businesses to obtain financial support, particularly for purchasing machinery and equipment. The credit guarantee will be provided through a self-financing fund, covering loans up to ₹100 crore. However, borrowers will be required to pay an upfront guarantee fee, along with an annual fee based on the remaining loan balance.
This initiative comes as part of the government’s efforts to boost the MSME sector, which has seen significant growth in exports. MSME exports have surged from ₹3.95 lakh crore in 2020-21 to ₹12.39 lakh crore in 2024-25.
Nagaraju also highlighted the increasing contribution of MSMEs to India’s GDP. The Gross Value Added (GVA) by MSMEs in India’s GDP was 29.7% in 2017-18 and rose to 30.1% in 2022-23.
In his speech, Nagaraju emphasized the importance of linking rural producers, self-help groups (SHGs), and microenterprises to market opportunities and financial services. He pointed out that rural areas are emerging as new centers of growth, with the government’s financial inclusion initiatives playing a key role in this development. Under the Pradhan Mantri Jan Dhan Yojana (PMJDY), over 53 crore new bank accounts have been opened, with many of the beneficiaries being women from rural areas.
Nagaraju also praised the role of SHGs in promoting entrepreneurship and economic resilience in rural communities.
