Mutual Credit Guarantee Scheme for MSMEs Explained

Mutual Credit Guarantee Scheme for MSMEs Explained

Loan Without Collateral | Budget 2024-25 | CA Vikas Jain

The Indian government has taken a landmark step in Budget 2024-25 by launching the Mutual Credit Guarantee Scheme (MCGS) for MSMEs. Aimed at boosting credit access without collateral, this scheme provides a much-needed lifeline to medium and small-scale entrepreneurs who often struggle to secure funding for expansion and innovation.

In this blog, CA Vikas Jain and host Sofia explain the ins and outs of this powerful initiative, breaking it down in simple terms for business owners and startups.

Mutual Credit Guarantee Scheme for MSMEs

The Mutual Credit Guarantee Scheme (MCGS) is a government-backed initiative that provides up to 60% credit guarantee on business loans, especially for manufacturing units and growth-focused MSMEs. This means MSMEs can now raise loans of up to ?100 crore without providing traditional collateral, thanks to the government acting as a partial guarantor.

Key Highlights of the Scheme:

• Loan Coverage: Up to ?100 crore
• Guarantee Coverage: 60% of the loan by the Government
•  Validity: 4 years OR till the ?7 lakh crore limit is reached
•  Eligibility: Udyam-registered MSMEs with 75% investment in fixed assets
• Sector Focus: Manufacturing & capital-intensive industries
•  Application Mode: Through registered banks & NBFCs (no direct government portal)

?7 Lakh Crore Such a Big Deal

The scheme guarantees loans worth up to ?7 lakh crore over its lifetime, unlocking huge credit opportunities for over 5 lakh MSMEs. This is a game-changer because:

• MSMEs can grow faster without pledging property
• Encourages industrial expansion and employment
• Bridges the funding gap in medium enterprise segment
• Attracts private investment with government-backed assurance

Who Can Apply?

To be eligible, the MSME must:

• Be Udyam registered
• Have a project where 75% of cost is for machinery or fixed assets
• Not be declared NPA
• Approach a registered bank or NBFC part of the MLI network

 How to Apply?

• Prepare a business/project report focused on manufacturing or equipment-based investment
• Visit a bank or NBFC participating in the MCGS scheme
• Mention your interest in applying under MCGS-MSME
• Submit financial documents, Udyam certificate, and promoter contribution (~5%)
• Post-loan sanction, your bank will initiate the guarantee process with NCGTC (National Credit Guarantee Trustee Company)

 Benefits of the Scheme:

•  Collateral-Free Loans up to ?100 crore
• Support for Manufacturing Growth
• Reduces Lending Risk for Banks
•  Boosts Entrepreneurship in Capital-Intensive Sectors
• Promotes Inclusive Economic Growth

 FAQs 

Q1: Is this different from the CGTMSE Scheme?

Yes. CGTMSE covers micro and small enterprises up to ?5 crore. MCGS is designed for larger MSMEs needing loans up to ?100 crore.

Q2: Can existing MSMEs apply for expansion loans?

Yes. Both new and existing MSMEs planning plant or machinery investment can apply.

Q3: Is there any subsidy on interest rate?

No direct interest subsidy is offered. However, easier access to collateral-free loans is the biggest benefit.

Q4: What happens in case of loan default?

In the event of default, banks can claim up to 60% of the unpaid loan amount from NCGTC. The borrower remains liable for repayment and legal action may be taken if required.

Q5: Can I apply online?

There is no direct online portal from the government. You must apply via an MLI (Member Lending Institution) such as SBI, PNB, HDFC, ICICI, or major NBFCs.

 Need Assistance?

If you're a business owner planning to expand operations or set up a new manufacturing unit — this is your chance.

Call Now: 9863-02-02-02

Visit: FinanceSeva.com

Let us help you get funded — without collateral, without hassle!

 Conclusion:

The Mutual Credit Guarantee Scheme for MSMEs is one of the most powerful initiatives to emerge from Budget 2024-25. It opens doors for growth, innovation, and job creation, especially in India’s backbone sector — the MSME industry.

If you're looking for debt funding without collateral, don’t miss this opportunity.