NEW DELHI, Jan 30: The introduction of a new credit guarantee program specifically for the MSME sector, which encompasses loans of up to Rs 100 crore, is expected to attract greater investments, enhance manufacturing, and elevate the nation’s export capabilities, according to exporters.
They highlighted that the lack of sufficient financing for capital investments has historically posed challenges for MSMEs, hampering their growth and competitiveness in international markets.
On January 29, the government unveiled the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) aimed at providing 60% guarantee coverage by the National Credit Guarantee Trustee Company Ltd (NCGTC) to Member Lending Institutions (MLIs) for credit facilities up to Rs 100 crore, designated for eligible MSMEs to acquire equipment or machinery, as stated by the finance ministry.
To qualify for the scheme, MSMEs must meet certain requirements, including possession of a valid Udyam Registration Number, ensuring that the guaranteed loan amount does not surpass Rs 100 crore. Additionally, project costs may be higher, though at least 75% of the total project cost must be allocated for purchasing equipment or machinery.
“This scheme is set to significantly improve the financial access for our micro, small, and medium enterprises, especially for those involved in manufacturing and exporting,” stated Ajay Sahai, Director General of the Federation of Indian Export Organisations (FIEO).
He emphasized that with a 60% guarantee from the National Credit Guarantee Trustee Company Ltd and access to credit facilities of up to Rs 100 crore, MSMEs will receive the vital support they need to invest in modern machinery and equipment.
“This initiative aligns seamlessly with the ‘Make in India, Make for the World’ vision, empowering our enterprises to enhance production, improve quality, and broaden their global reach,” Sahai added, mentioning that the export credit rate for MSMEs is between 10-11.5%, while term loans vary from 11-13.5%.
The scheme will be applicable for all loans sanctioned under MCGS-MSME over the four years following the release of the operational guidelines, or until a cumulative guarantee of Rs 7 lakh crore is issued, whichever comes first, according to the announcement.
The manufacturing sector currently accounts for 17% of the country’s GDP and employs over 27.3 million individuals.
International trade expert and Hi-Tech Gears Chairman Deep Kapuria remarked that the scheme represents a timely governmental policy decision. “In light of India’s commitment to enhancing manufacturing and the ongoing realignment of the global supply chain, this credit assistance for MSMEs will significantly facilitate their integration into global value chains,” he stated.
Kapuria further pointed out that this initiative would particularly benefit the electronics sector as India seeks to establish its own component manufacturing ecosystem.
“This will also promote the shift of component manufacturing to India by leading firms, in addition to bolstering our export figures since MSMEs are key contributors to national exports,” he added.
Export entrepreneur and Founder Chairman of Technocraft Industries SK Saraf stated that the scheme will aid in boosting domestic manufacturing and raising the sector’s contribution to GDP.
Expressing support for the initiative, Apparel Export Promotion Council (AEPC) Secretary General Mithileshwar Thakur noted that it would significantly unlock the manufacturing potential of MSMEs, enhancing their contribution to India’s GDP, which is crucial for the country’s transformation into a developed nation.
“The apparel industry, predominantly comprised of MSMEs, stands to benefit tremendously, which will also encourage job creation,” he said. (PTI)
