The Government of India (GoI) has approved the introduction of the Mutual Credit Guarantee Scheme for Micro, Small, and Medium Enterprises (MCGS-MSME). This scheme offers a 60 percent guarantee coverage from the National Credit Guarantee Trustee Company (NCGTC) to member lending institutions (MLIs) for loans up to Rs 100 crore.

The credit facility is aimed at helping MSMEs purchase equipment and machinery to expand their manufacturing capacities, thus promoting faster manufacturing growth. Under the scheme, loans up to Rs 50 crore will have a repayment period of up to eight years, with a two-year moratorium on principal installments. Loans above Rs. 50 crore will be considered for longer repayment schedules and moratoriums on principal installments based on the case.

Importantly, the minimum cost of equipment or machinery will constitute at least 75 percent of the total project cost. In terms of fees, the scheme offers a Nil guarantee fee during the loan sanction year. For the next three years, the annual guarantee fee will be 1.5 percent of the outstanding loan balance as of 31 March of the previous year. Afterward, the fee will reduce to one percent per annum of the loan outstanding balance as of 31 March each year.

The MCGS-MSME will be operational for four years or until a cumulative guarantee of Rs seven lakh crore is issued, whichever comes first.