New Delhi, Jan 29 (PTI) The government on Wednesday launched a new credit guarantee scheme for the MSME sector covering loans up to Rs 100 crore in line with the FY25 Budget announcement.

The introduction of Mutual Credit Guarantee Scheme for MSMEs (MCGS- MSME) aims at providing 60 per cent guarantee coverage by National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs) for credit facility up to Rs 100 crore sanctioned to eligible MSMEs for purchase of equipment/machinery, the finance ministry said in a statement.

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For availing the scheme, the MSMEs should fulfil certain conditions which include that the borrower should be an MSME with valid Udyam Registration Number, loan amount guaranteed shall not exceed Rs 100 crore, project cost could be of higher amounts also and minimum cost of equipment /machinery is 75 per cent of project cost.

Annual Guarantee Fee on loan under the scheme shall be nil during the year of sanction, it said, adding, it shall be 1.5 per cent p.a. of loan outstanding as on March 31 of previous year for the next three years, and thereafter, annual guarantee fee shall be 1 per cent p.a. of loan outstanding as on March 31 of previous year, it said.

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The scheme will be applicable to all loans sanctioned under MCGS-MSME during the period of four years from the date of issue of operational guidelines of the scheme or till cumulative guarantee of Rs 7 lakh crore are issued, whichever is earlier, it said.

Manufacturing sector currently comprises 17 per cent of the nation's GDP and over 27.3 million workers.

The Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) is expected to facilitate the availability of credit for purchase of plant and machinery / equipment by MSMEs and give a major boost to manufacturing and thereby to 'Make in India', it said.

Global supply chains are realigning. India is emerging as an alternative supply source given its raw materials, low labour costs, growing manufacturing knowhow, and entrepreneurial ability, it said.

One of the major costs involved in manufacturing is the fixed cost of plant and machinery (P&M)/ equipments, it said.

With availability of credit to expand the installed capacity of manufacturing units, it can be expected that the manufacturing will grow at a faster pace, it said.

Also, it said, the need for a credit guarantee scheme for the manufacturing units, particularly for the enterprises in the medium category, has been raised by industry associations from time to time.

So, it said, to give a boost to manufacturing by facilitating the availability of credit for purchase of plant and machinery / equipment, 'Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) is being introduced.

The scheme will facilitate collateral-free loans by banks and financial institutions to MSMEs who are in need of debt capital for their expansion and growth, it added.

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