New MSME Credit Guarantee Scheme: The Government of India has launched a new credit guarantee scheme to promote small and medium enterprises (MSME), under which MSMEs can get a loan of up to Rs 100 crore. This New MSME Credit Guarantee Scheme has been brought especially to strengthen the manufacturing sector so that the ‘Make in India’ initiative can be further promoted.
This scheme has been named “Mutual Credit Guarantee Scheme (MCGS-MSME)”. Under this scheme, the National Credit Guarantee Trustee Company Limited (NCGTC) will guarantee up to 60% on loans given by banks and other financial institutions. This will give small and medium enterprises easy loans to buy new machines and equipment, so that they can increase their production.
Who will get the benefit of this New MSME Credit Guarantee Scheme?
To avail the benefits of this New MSME Credit Guarantee Scheme, MSMEs will have to fulfill some necessary conditions, so that it can be ensured that only those units can take advantage of this scheme which are actually contributing to the manufacturing and production sector and which can play an important role in moving the Indian economy forward. These conditions include the following points:
Must be a recognized MSME – which has a valid Udyam Aadhar (Udyam Registration Number) and which falls in the category of small or medium enterprise as per the criteria set by the government.
Loan limit – A maximum loan of up to ₹ 100 crore can be taken under this scheme, however, the total cost of the project to avail this scheme can be more than this, but the amount which will be guaranteed by the government will be limited to ₹ 100 crore.
Focus on Equipment and Machinery – The loan amount provided under this scheme can only be used for purchasing machinery and equipment, and it is mandated that at least 75% of the project cost should be spent on machinery or equipment to ensure that the financial assistance received is actually used to enhance production capacity.
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How much interest and other charges will have to be paid on taking a New MSME Credit Guarantee Scheme loan?
- There will be no guarantee fee in the first year, which will provide relief to new enterprises and they will be able to expand their business without any additional financial pressure.
- For the next three years, there will be a fee of 1.5% per annum, which will have to be paid by the borrower.
- After the fourth year, it will be 1% per annum, so that it can be ensured that the business continues to get financial support for a long time and there is no more financial burden on them.
What is the duration of this facilities
This scheme will be in force for four years, or until a guarantee of ₹ 7 lakh crore is issued, this facility will continue to be available to MSMEs.
Manufacturing will get a boost in India
The manufacturing sector contributes 17% of India’s GDP and employs more than 2.73 crore people. But the biggest problem faced by this sector is that it takes a lot of money to set up a plant and machinery. With this new scheme, MSMEs will get cheap and easy loans to increase their production capacity.
‘Make in India’ and Global Supply Chain
The world’s global supply chain is changing and India is emerging as a new manufacturing hub. India has raw materials, cheap labour and growing technical knowledge, which makes it an attractive option.
Why is credit guarantee necessary for MSME?
- Many medium scale industries find it difficult to get loans because they do not have sufficient assets or security, due to which banks and financial institutions hesitate to give them loans.
- With this scheme, banks will be able to give loans without any guarantee, which will make it easier for industries to raise money and they will be able to take their business forward.
- The government paid attention to the demand of the MSME sector and this scheme was brought so that more and more companies can easily buy machinery, which will increase production capacity and strengthen the industrial progress of the country.
How to apply for New MSME Credit Guarantee Loan Scheme?
If you are also associated with the MSME sector and want to take advantage of this scheme, then you can contact banks or financial institutions for this. Soon the government will issue operational guidelines related to this New MSME Credit Guarantee Scheme, after which the application process will start.
Conclusion
This new credit guarantee scheme of the Government of India is a big step to strengthen the MSME sector and increase manufacturing. If implemented properly, this scheme will not only help in promoting small and medium enterprises but will also prove to be helpful in making India a big manufacturing hub.