Govt launches 100cr Mutual Guarantee Scheme for MSMEs

New Delhi: In a significant move to boost credit access for Micro, Small, and Medium Enterprises (MSMEs), Minister of State for Finance, Pankaj Choudhary, informed the Rajya Sabha on March 18, 2025, about the launch of the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME). The scheme aims to provide eligible MSMEs with credit facilities of up to ₹100 crore, backed by a 60% guarantee to encourage investment in equipment and machinery.

Key Features of the MCGS-MSME

The scheme is being implemented by the National Credit Guarantee Trustee Company Limited (NCGTC), a wholly owned entity under the Department of Financial Services, Ministry of Finance. It covers loans provided by Scheduled Commercial Banks (SCBs), All India Financial Institutions (AIFIs), and Non-Banking Financial Companies (NBFCs) under its guarantee framework.

Eligibility Criteria for MSMEs

• MSMEs must have a valid Udyam Registration Number.
• They should not be classified as Non-Performing Assets (NPA) with any lender.
• At least 75% of the total project cost must be allocated to equipment or machinery purchases.

How the Scheme Works

Once an MSME applies for a loan under this scheme, the Member Lending Institution (MLI) must submit loan details to the NCGTC portal along with the required fees. Upon successful verification, the 60% credit guarantee coverage is confirmed, reducing lending risks and making finance more accessible for MSMEs.

Additional MSME Taxation Relief Measures

The introduction of the MCGS-MSME scheme aligns with recent government initiatives aimed at easing financial and tax compliance burdens for small businesses. Key tax reforms include:

Presumptive taxation benefits under Sections 44AD & 44AE of the Income-tax Act.

Tax audit relaxations under Section 44AB.

Omission of Tax Collected at Source (TCS) on the sale of specific goods under Section 206C.

Rationalization of Tax Deducted at Source (TDS) rates to streamline compliance.

Driving MSME Growth & Economic Development

The MCGS-MSME is a crucial step in ensuring the long-term sustainability and expansion of small businesses. By reducing credit risks for lenders, the government aims to enhance MSME financing, boost capital investment in machinery, and ultimately drive economic growth.

With financial assistance, tax relaxations, and digitization efforts, the government continues to strengthen the MSME ecosystem, ensuring small businesses have the support they need to thrive in a competitive market.

Disclaimer: This summary is for informational purposes and readers should verify specific details through official reports or consult industry professionals for comprehensive insights.