Govt to provide 60% guarantee on capital credit of up to Rs100 crore to MSMEs
30 Jan 2025
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National Credit Guarantee Trustee Company Limited (NCGTC) will provide guarantee of up to 60 per cent to member lending institutions for extending capital credit to micro, small and medium enterprises, under a Mutual Credit Guarantee scheme approved by the government.
Under the facility, announced in the 2024-25 budget, NCGTC will provide such guarantee for credit upto Rs100 crore to eligible MSMEs under MCGS-MSME for purchase of plant and machinery/equipment.
To be eligible for such loan guarantee, the borrower should be an MSME with valid `Udyam’ registration number. The amount of loan amount to be guaranteed should not exceed Rs100 crore. While the project cost could be of higher, the minimum cost of equipment /machinery should be 75 per cent of the project cost.
For purpose of credit guarantee, loans upto Rs50 crore should have a repayment period of a maximum 8 years with a 2-year moratorium on repayment of principal instalments. For loans above Rs50 crore, higher repayment schedule and moratorium period on principal instalments can be considered.
An initial, upfront, contribution of 5 per cent of the loan amount has to be deposited before applying for guarantee cover.
There will be no annual guarantee fee on loan under the scheme during the year of sanction. For the subsequent 3 years, there will be a 1.5 per cent annual charge on outstanding loans as of 31 March. Thereafter, the annual guarantee fee will be 1 per cent of loan outstanding as of 31 March of the previous year.
The scheme will be applicable to all loans sanctioned under MCGS-MSME for a 4-year period after the operational guidelines of the scheme or till cumulative guarantee of Rs7 lakh crore are issued, whichever is earlier.
Manufacturing sector accounts for 17 per cent of the nation’s GDP and provides employment to over 27.3 million people. The Mutual Credit Guarantee Scheme for MSMEs is expected to facilitate the availability of credit to MSMEs and give a major boost to manufacturing and to `Make in India’.