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News: Recently, the Mutual Credit Guarantee Scheme (MCGS) has been modified to support Micro, Small and Medium Enterprises (MSME) Manufacturers and Exporters in line with Budget 2025-26.
About Revised Mutual Credit Guarantee Scheme for MSMEs (MCGS- MSME)
- It was launched to support Micro, Small and Medium Enterprises (MSME) Manufacturers and Exporters.
- It was initially launched in January 2025.
- Implementing agency: The scheme will be implemented by National Credit Guarantee Trustee Company Ltd (NCGTC).
- Objectives:
- To provide affordable access of credit to MSMEs.
- To improve financial accessibility for MSMEs, particularly those involved in manufacturing and exports.
- To support enterprises in enhancing production, improve quality and extend their global reach.
- Eligibility: Under Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME), the borrower:
- should be an MSME with valid Udyam Registration number.
- should not be an NPA with any lender.
- minimum cost of equipment /machinery is 65% of project cost.
- Service sector MSMEs also included in the Scheme.
- Features: The scheme provides 60% guarantee coverage by National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs) for credit facility upto ₹ 100 crore sanctioned to eligible MSMEs under MCGS-MSME for purchase of equipment/ machinery.
- Modifications in the existing “MCGS–MSME” scheme:
- Upfront Contribution (For exporters also): The upfront contribution is fixed at 2% of the loan amount (maximum ₹40 lakh), out of which 1% each will be refunded in the 4th and 5th year of the guarantee period.
- Guarantee Tenure: The guaranteed tenure under the scheme will expire after 10 years.
- Special provisions for exporters
- Eligible exporters: Profitable units having exported at least 25% of their sales turnover in each of previous 3 financial years and satisfying certain export realisation conditions.
- Guaranteed Loan Amount: The guaranteed loan amount available under this provision is up to ₹20 crore.
- Guarantee Coverage: The guarantee coverage provided under the scheme is 75% of the amount in default.
- Guarantee Fee: The guarantee fee for the first year is nil, and thereafter, a fee of 0.50% of the outstanding loan amount will be charged every year.
