Financial Services Secretary M Nagaraju announced on Thursday that a new credit guarantee scheme for the Micro, Small and Medium Enterprises (MSME) sector will be introduced shortly, covering loans of up to Rs 100 crore. “We are preparing to unveil a scheme, which was highlighted by the Finance Minister in her recent Budget, potentially offering loans of up to Rs 100 crore without the need for a guarantee, provided the business is already established,” he stated during the concluding day of the Grameen Bharat Mahotsav.
The proposal is expected to be presented to the Union Cabinet soon for approval. “To facilitate term loans for MSMEs aimed at purchasing machinery and equipment without requiring collateral or third-party guarantees, a credit guarantee scheme will be launched. This initiative will operate by pooling the credit risks of such MSMEs. A specially created self-financing guarantee fund will offer each applicant guarantee cover of up to Rs 100 crore, although the loan amount may exceed this limit,” the Finance Minister Nirmala Sitharaman disclosed in the Budget for 2024-25.
Borrowers will need to pay an upfront guarantee fee as well as an annual guarantee fee based on the reducing loan balance, she added. The MSME sector currently provides employment for 50 million people. Exports from MSMEs have experienced significant growth, climbing from Rs 3.95 lakh crore in 2020-21 to Rs 12.39 lakh crore in 2024-25, highlighting their vital role in enhancing India’s economy and reinforcing global trade.
The MSME sector in India has continually shown exceptional resilience and adaptability, making substantial contributions to the country’s GDP over the years. The Gross Value Added (GVA) by MSMEs within India’s GDP was 29.7% in 2017-18 and rose to 30.1% in 2022-23. To encourage entrepreneurship in rural India, Nagaraju emphasised that the government is eager to extend more support to rural areas through its various initiatives.
As the nation progresses, he highlighted the necessity to focus on four key areas:
- Quality
- Linkages for exports
- Capacity building
- Support to achieve the vision of Vikshit Bharat