Government to Launch INR 100 Cr Credit Guarantee Scheme for MSMEs Borrowers will need to pay an upfront guarantee fee and an annual fee based on the reducing loan balance.
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The government is set to unveil a groundbreaking credit guarantee scheme for the Micro, Small, and Medium Enterprises (MSME) sector, covering loans of up to INR 100 crore, according to Press Trust of India.
Financial Services Secretary M Nagaraju announced the initiative during the Grameen Bharat Mahotsav, emphasising its transformative potential for MSMEs.
The scheme, anticipated to receive Union Cabinet approval soon.
"For facilitating term loans to MSMEs for purchase of machinery and equipment without collateral or third-party guarantee, a credit guarantee scheme will be introduced. The scheme will operate on pooling of credit risks of such MSMEs. A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to Rs 100 crore, while the loan amount may be larger," the Finance Minister Nirmala Sitharaman had announced in Budget 2024-25.
Borrowers will need to pay an upfront guarantee fee and an annual fee based on the reducing loan balance.
The MSME sector, employing over 50 million people, plays a pivotal role in India's economy. Exports from this sector surged from INR 3.95 lakh crore in 2020-21 to INR 12.39 lakh crore in 2024-25, underscoring its growing significance in global trade. Additionally, MSMEs' contribution to India's GDP, measured as Gross Value Added (GVA), rose from 29.7% in 2017-18 to 30.1% in 2022-23.
Highlighting the government's focus on rural entrepreneurship, Nagaraju emphasised the importance of lending to rural areas through various schemes. He also outlined four critical focus areas to realise the vision of a developed India: quality improvement, export linkages, capacity building, and comprehensive support.
The new credit guarantee scheme is poised to empower MSMEs further, enhancing their role as a cornerstone of India's economic growth and global competitiveness.
