Credit Guarantee Scheme for MSME’s

Credit Guarantee Scheme for MSME’s

• The government has approved the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME), announced in the FY25 Budget, two days before the presentation of the Union Budget 2025-26.
• The scheme aims to facilitate collateral-free loans for Micro, small, and medium enterprises (MSMEs) by providing credit guarantee coverage for loans up to ₹100 crore.
• National Credit Guarantee Trustee Company Limited (NCGTC) will provide 60% guarantee coverage to Member Lending Institutions (MLIs).

Key Features of the Scheme

Loan Coverage & Eligibility

• MSMEs can avail of loans up to ₹100 crore for purchasing equipment and machinery.
• The minimum cost of equipment/machinery must be 75% of the total project cost.
• MSMEs must have a valid Udyam Registration Number to be eligible.

Repayment Period & Moratorium

• Loans up to ₹50 crores: Repayment period of up to 8 years, with a 2-year moratorium on principal instalments.
• Loans above ₹50 crore: Higher repayment schedule and moratorium period can be considered.
• Guarantee Fee & Initial Contribution: 5% initial contribution of the loan amount is required at the time of application.
• Scheme Duration: The scheme will apply to loans sanctioned under MCGS-MSME for four years from the date of operational guidelines issuance or until ₹7 lakh crore in guarantees are issued.

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