Centre to soon launch new credit guarantee scheme for MSME sector up to ₹100 crore

The Union government would soon launch a new credit guarantee scheme for the MSME sector covering loans up to ₹100 crore, financial services secretary M Nagaraju said on Thursday.

"We are likely to come up with a scheme, which was announced by Finance Minister in her last Budget session, that could provide loans up to ₹100 crore without guarantee, if they are already having the enterprise," he said at the concluding day of Grameen Bharat Mahotsav.

Micro, Small and Medium Enterprises (MSMEs) sector employs 50 million people, the official said.

The scheme is expected to be placed before the Union Cabinet soon for its approval.

In Union Budget 2024-25, Sitharaman announced that a credit guarantee scheme will be introduced for facilitating term loans to MSMEs for the purchase of machinery and equipment without collateral or third-party guarantee.

“A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to ₹100 crore, while the loan amount may be larger," she had said.,

The borrower will have to provide an upfront guarantee fee and an annual guarantee fee on the reduced loan balance.

MSMEs exports have witnessed a remarkable rise, increasing from ₹3.95 lakh crore in 2020-21 to ₹12.39 lakh crore in 2024-25.

The MSME sector in India has consistently demonstrated remarkable resilience and adaptability, significantly contributing to the nation's GDP over the years. The Gross Value Added (GVA) by MSMEs in India's GDP was 29.7 per cent in 2017-18, rising to 30.1 per cent in both 2022-23.

Nagaraju stressed the importance of linking rural producers, self-help groups (SHGs), and microenterprises with market opportunities and financial services.

“India lives in villages. Grameen Bharat is the one actually that drives a lot of things in the country,” he said. "And villages are the new centres of growth everywhere in the country."

He lauded the government’s flagship financial inclusion initiatives, noting that over 53 crore new bank accounts were opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY), with a majority of beneficiaries being women from rural areas.

Nagaraju also highlighted the role of SHGs in fostering entrepreneurship and economic resilience in rural areas.