🗂️ Topic: Economy / MSMEs / Manufacturing

Govt Approves Mutual Credit Guarantee Scheme to Boost MSME Equipment Financing

Introduction

The Government of India has approved the Mutual Credit Guarantee Scheme for Micro, Small, and Medium Enterprises (MCGS-MSME). Aimed at enhancing access to affordable credit, the scheme offers 60% guarantee coverage on loans up to ₹100 crore to help MSMEs purchase equipment and machinery vital for scaling up manufacturing operations.

🏭 Scheme Overview

• Open to eligible MSMEs with Udyam Registration
• Maximum guarantee coverage: ₹100 crore loan per borrower
• Focus: Purchase of equipment/machinery, forming at least 75% of project cost
• Supports both existing and new units

📑 Loan Terms and Repayment

• Loans ≤ ₹50 crore:
  • Repayment: Up to 8 years
  • Moratorium: Up to 2 years
• Loans > ₹50 crore:
  • Extended repayment and moratorium available
• Initial contribution: 5% of loan amount at application stage

💸 Guarantee Fee Structure

This step-down fee structure encourages early adoption and sustained use of the scheme with minimal upfront burden.

📈 Economic Significance

• Manufacturing contributes 17% to India’s GDP
• Employs over 27.3 million workers
• The goal: Raise this to 25% of GDP under Make in India
• MCGS-MSME will:
  • Enable capacity expansion
  • Strengthen credit access
  • Support job creation and economic growth

🌍 Global Positioning of Indian MSMEs

• India is emerging as a global manufacturing hub
• Competitive advantages:
  • Abundant raw materials
  • Low labour costs
  • Skilled workforce
• Access to credit through MCGS-MSME will help MSMEs:
  • Modernize production
  • Improve global competitiveness
  • Participate in realigning supply chains

🕰️ Implementation Timeline

• Operational for 4 years from issuance of operational guidelines
• Or until a cumulative guarantee of ₹7 lakh crore is reached — whichever is earlier
• Reflects strong long-term commitment to MSME financing and growth