Mutual Credit Guarantee Scheme

31.01.2025

Mutual Credit Guarantee Scheme

Why in the news?      

            Recently, the central government approved the Mutual Credit Guarantee Scheme for micro, small and medium enterprises (MCGS-MSMEs), guaranteeing loans up to ₹100 crore.

About Mutual Credit Guarantee Scheme:

• It will provide 60 percent guarantee coverage by the National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs) for financing the eligible MSMEs, needed to purchase the equipment/machinery.
• The Scheme will be applicable to all loans sanctioned under MCGS-MSME during the period of 4 years from the date of issue of operational guidelines of the scheme or till cumulative guarantee of Rs. 7 lakh crores are issued, whichever is earlier.

Salient Features of the Scheme:

• Borrower should be an MSME with valid Udyam Registration Number;
• It provides a loan guarantee up to Rs 100 crore, with a minimum of 75 percent of the project cost allocated for equipment or machinery.
• Under the scheme for loans up to 50 crore shall have repayment period of up to 8 years with up to 2 years moratorium period on principal installments.
• For loans above 50 crore, higher repayment schedule and moratorium period on principal installments can be considered.
• Upfront (initial) contribution of 5% of the loan amount shall be deposited at the time of application of guarantee cover.
• Annual Guarantee Fee on loan under the Scheme shall be Nil during the year of sanction. During the next 3 years, it shall be 1.5% p.a. of loan outstanding as on March 31 of previous year. Thereafter, Annual Guarantee Fee shall be 1% p.a. of loan outstanding as on March 31 of previous year.

                                                              Source: PIB

Consider the following statements regarding the Mutual Credit Guarantee Scheme for micro, small and medium enterprises (MCGS-MSMEs):

1. It aims at providing 60 per cent guarantee coverage by National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions.

2. Under this scheme a borrower should be an MSME with a valid Udyam Registration Number.

Which of the statements given above is/are correct?

A.1 only

B.2 only

C.Both 1 and 2

D.Neither 1 nor 2

Answer C