The government on Wednesday approved a Mutual Credit Guarantee Scheme to improve credit availability for micro, small and medium manufacturing sectors, aligning with the goals set under the Make in India Union Budget 2024-25 for the MSME sector.

The scheme will offer 60 percent guarantee coverage through the National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs) for loans up to Rs 100 crore, helping eligible MSMEs finance the purchase of equipment and machinery.

This credit will enable MSME industries to purchase plant, machinery, and equipment, boosting the sector and strengthening the Make in India initiative.

The finance ministry, in a press release, revealed that the manufacturing sector currently contributes 17 percent to India’s GDP, providing jobs to more than 27.3 million workers. It further added that PM Modi’s vision of ‘Make in India, Make for the World’ aims to increase this share to 25 percent of GDP.

Features of the scheme

The borrower should be an MSME with valid Udyam Registration Number and the loan amount guaranteed should not surpass Rs 100 crores.

Though the project cost could be higher, 75 percent of it should be used for equipment and machinery.

If the loan amount is Rs 50 crore or less, the borrower can repay it over a maximum of 8 years. They are also granted a 2-year break at the start, during which they don’t have to pay the principal amount, only interest (a moratorium period).

If the loan exceeds Rs 50 crore, the repayment period and moratorium period can be extended further.