Government to Roll Out ₹100 Crore Credit Guarantee Scheme for MSMEs Soon

The Government of India is set to introduce a new credit guarantee scheme for the Micro, Small, and Medium Enterprises (MSMEs) sector, offering loans of up to ₹100 crore without collateral. The initiative, aimed at strengthening the backbone of India’s economy, was announced by Financial Services Secretary M Nagaraju on Thursday during the concluding day of the Grameen Bharat Mahotsav.

The scheme, which was outlined in Finance Minister Nirmala Sitharaman Union Budget 2024-25, is expected to receive Cabinet approval shortly. Highlighting its key features, Nagaraju said, “This scheme will enable MSMEs to avail term loans for purchasing machinery and equipment without the need for collateral or third-party guarantees.”

Under the proposed framework, a self-financing guarantee fund will be established to pool credit risks associated with MSMEs. The fund will offer a guarantee cover of up to ₹100 crore per applicant, though the total loan amount could exceed this limit. Borrowers will need to pay an upfront guarantee fee and an annual fee based on the reducing balance of the loan, as per the Finance Minister's Budget announcement.

The MSME sector, a critical pillar of India’s economy, employs over 50 million people and has demonstrated robust growth in recent years. Exports from the sector surged from ₹3.95 lakh crore in 2020-21 to a staggering ₹12.39 lakh crore in 2024-25, reflecting its vital role in driving India’s global trade presence.

Furthermore, the sector’s contribution to India’s GDP has steadily increased, with its Gross Value Added (GVA) rising from 29.7% in 2017-18 to 30.1% in 2022-23.

In a bid to promote entrepreneurship in rural India, the government is focusing on enhancing lending to rural areas through various schemes. Nagaraju emphasised the need to prioritise four key areas for the sector’s growth: quality, export linkages, capacity building, and support for realising the vision of Vikshit Bharat.

“The MSME sector has consistently showcased resilience and adaptability, making it a cornerstone of India’s economic landscape,” he noted, urging stakeholders to work towards enhancing its competitiveness globally.