New credit guarantee scheme for MSMEs to boost investment, manufacturing, exports: Exporters

New Delhi: The launch of a new credit guarantee scheme for the MSME sector covering loans up to Rs 100 crore will help attract more investments, promote manufacturing and boost the country's exports, exporters say.

They said that the exporting community's lack of adequate financing for capital investments has long been a challenge for MSMEs, restricting their ability to scale and compete in global markets.

On January 29, the government launched the Mutual Credit Guarantee Scheme for MSMEs (MCGS- MSME) with an aim to provide 60 per cent guarantee coverage by National Credit Guarantee Trustee Company Ltd (NCGTC) to Member Lending Institutions (MLIs) for credit facility of up to Rs 100 crore sanctioned to eligible MSMEs for purchase of equipment/machinery, the finance ministry said in a statement.

For availing the scheme, the MSMEs should fulfil certain conditions which include that the borrower should be an MSME with valid Udyam Registration Number, loan amount guaranteed shall not exceed Rs 100 crore, project cost could be of higher amounts also and minimum cost of equipment /machinery is 75 per cent of project cost.

"The scheme will significantly enhance the financial accessibility of our micro, small, and medium enterprises, particularly those engaged in manufacturing and exports," Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said.

He said that with 60 per cent guarantee coverage by the National Credit Guarantee Trustee Company Ltd and a credit facility of up to Rs 100 crore, MSMEs will now have much-needed support to invest in modern machinery and equipment.

"This move aligns perfectly with the 'Make in India, Make for the World' vision, enabling our enterprises to boost production, improve quality, and expand their global footprint," Sahai said, adding that the export credit rate for MSMEs ranges between 10-11.5 per cent, while term loan ranges between 11-13.5 per cent.

The scheme will be applicable to all loans sanctioned under MCGS-MSME during the period of four years from the date of issue of operational guidelines of the scheme or till cumulative guarantee of Rs 7 lakh crore are issued, whichever is earlier, it said.

Manufacturing sector currently comprises 17 per cent of the nation's GDP and over 27.3 million workers.

International trade expert and Hi-Tech Gears Chairman Deep Kapuria said the scheme is a timely policy announcement by the government. "Given India's focus to boost manufacturing and the current realignment of the global supply chain, this policy of providing credit to MSMEs would be a big enabler in their integration into global value chains," he said.

Kapuria added that this would particularly help the electronics sector where India is trying to promote its own component manufacturing ecosystem.

"This will further facilitate the relocation of components manufacturing to India by lead companies. Besides, this will also help in increasing our exports as MSMEs are a big contributor to the country's exports," he added.

Mumbai-based exporter and Founder Chairman Technocraft Industries SK Saraf said the scheme will help boost domestic manufacturing and increase the sector's share in the country's GDP.

Hailing the announcement, Secretary General Apparel Export Promotion Council (AEPC) Mithileshwar Thakur said this will go a long way in unlocking manufacturing potential of MSMEs and raising share of manufacturing in India's GDP, which is so very crucial in India's journey towards becoming a developed nation.

"Apparel industry, which is largely dominated by MSMEs, will particularly stand to gain immensely, which in turn will boost employment generation," he said.