Mutual Credit Guarantee (MCG) scheme for Medium and Smal Enterprise (MSMEs) to boost investment, manufacturing, exports: Exporters
- IBEF
- January 31, 2025
The recent launch of a credit guarantee scheme for the MSME sector, which covers loans up to Rs. 100 crore (US$ 11.6 million), is expected to attract more investments, promote manufacturing, and enhance exports, according to exporters. They noted that inadequate financing for capital investments has long hindered the exporting community, limiting the ability of MSMEs to scale and compete globally. On January 29, the government introduced the MCGS-MSME, aiming to provide 60% guarantee coverage from the National Credit Guarantee Trustee Company Ltd (NCGTC) to Member Lending Institutions (MLIs) for eligible MSMEs seeking credit for equipment and machinery purchases. To qualify for the scheme, MSMEs must meet specific criteria, including having a valid Udyam Registration Number and ensuring that the guaranteed loan amount does not exceed Rs. 100 crore (US$ 11.6 million). While the project cost may be higher, at least 75% must be allocated to equipment or machinery.
The Federation of Indian Export Organisations (FIEO) highlighted that this scheme would significantly improve financial accessibility for micro, small, and medium enterprises, particularly those involved in manufacturing and exports. The initiative aligns with the "Make in India, make for the World" vision, allowing enterprises to enhance production, improve quality, and extend their global reach. Export credit rates for MSMEs range from 10% to 11.5%, while term loans range from 11% to 13.5%. The scheme will apply to all loans sanctioned under MCGS-MSME for four years from the issuance of operational guidelines or until a cumulative guarantee of Rs. 7 lakh crore (US$ 80.9 billion) is reached, whichever comes first. Currently, the manufacturing sector constitutes 17% of the nation's GDP and employs over 27.3 million workers. International trade expert Mr. Deep Kapuria described the scheme as a timely policy announcement, emphasizing its potential to boost manufacturing and integrate MSMEs into global value chains, especially in the electronics sector. He noted that the initiative would facilitate the relocation of component manufacturing to India and contribute to increased exports, given the significant role of MSMEs in the country's export landscape.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
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