The Union Government launched the ‘Mutual Credit Guarantee Scheme for MSMEs’ (MCGS-MSME), as announced in the Union Budget 2025-26, to support Micro, Small, and Medium Enterprises (MSMEs).
About MCGS-MSME
- The Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) is designed to provide financial support to MSMEs through collateral-free term loans for expanding production capacity and upgrading technology.
- Objective : To enhance credit access for MSMEs, allowing them to modernize, expand operations, and compete globally.
- MSMEs that are not classified as Non-Performing Assets (NPA) with any lender.
- At least 75% of the project cost must be allocated for purchasing machinery or equipment.
Salient Features of MCGS-MSME
- Loan Facilitation: The scheme provides collateral-free loans up to ₹100 crore to MSMEs.
- While the guaranteed loan amount cannot exceed ₹100 crore, the total project cost may be higher.
- Target Beneficiaries: Only MSMEs with valid Udyam Registration.
- Mutual Credit Guarantee Fund-MSME (MCGF-MSME)
National Credit Guarantee Trustee Company Ltd (NCGTC)
- Introduction: NCGTC is a trustee company established to manage and operate multiple credit guarantee trust funds, enhancing credit access for various sectors.
- Establishment : Incorporated on March 28, 2014, under the Indian Companies Act, 1956, with a paid-up capital of ₹10 crore.
- Location: Mumbai, Maharashtra.
- Function : Operates as a common trustee company for credit guarantee schemes, supporting MSMEs, startups, and other sectors under the Department of Financial Services, Ministry of Finance.
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- A dedicated fund named Mutual Credit Guarantee Fund-MSME (MCGF-MSME) has been created to manage the scheme.
- It was formed by the Department of Financial Services (DFS), Ministry of Finance.
- The fund is managed by the National Credit Guarantee Trustee Company Limited (NCGTC), a wholly owned company of DFS.
- Guarantee Coverage: NCGTC provides 60% guarantee coverage to Member Lending Institutions (MLIs) for loans sanctioned under MCGS-MSME.
- This reduces lending risks and encourages financial institutions to extend loans to MSMEs.
- Member Lending Institutions (MLIs): Financial institutions such as Commercial Banks, Non-Banking Financial Companies (NBFCs), and other registered lenders are eligible to participate as MLIs under the scheme.
- Scheme Duration: The scheme is available for four years or until ₹7 lakh crore worth of guarantees have been issued, whichever comes first.
About MSME
New Definition of MSME as per Union Budget 2025-26
| Category |
Investment Limit (₹ in Crore) |
Turnover Limit (₹ in Crore) |
| Micro Enterprises |
Current: 1 → Revised: 2.5 |
Current: 5 → Revised: 10 |
| Small Enterprises |
Current: 10 → Revised: 25 |
Current: 50 → Revised: 100 |
| Medium Enterprises |
Current: 50 → Revised: 125 |
Current: 250 → Revised: 500 |
Significance of MSMEs in the Indian Economy
- Overall Contribution to GDP: MSMEs contribute approximately 30% of India’s GDP, playing a vital role in economic growth.
- Contribution to Employment: MSMEs are one of the largest employment generators in India, providing over 11 crore jobs across various industries.
- They offer diverse employment opportunities, particularly in rural and semi-urban areas.
- Export Performance: MSMEs contribute around 45% of India’s total exports, making them a critical component of global trade.
- Support for ‘Make in India’ and By strengthening domestic manufacturing, the MSME sector helps in realising the goal under ‘Make in India’ initiative.
- Global Competitiveness: Enhanced credit access under MCGS-MSME allows MSMEs to scale operations, making India a key player in the global supply chain.
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