The Centre will Shortly Establish an MSME Loan Guarantee Scheme up to INR 100 Crore

Nitin Konde, Varun Bhardwaj

Jan 10, 2025 — 2 min read

Centre to Launch MSME Loan Guarantee Scheme Worth INR 100 Crore

On January 9, M Nagaraju, the secretary of financial services, announced that the Union government would shortly introduce a new credit guarantee program for the MSME sector that would cover loans up to INR 100 crore.

He stated on the last day of Grameen Bharat Mahotsav that the centre is likely to implement a plan that was revealed by the Finance Minister, Nirmala Sitharaman at her most recent budget session and that might offer loans up to INR 100 crore without guarantee if they already have the business. According to the official, 50 million people are employed in the Micro, Small, and Medium Enterprises (MSMEs) sector. It is anticipated that the plan would shortly be presented to the Union Cabinet for approval.

Facilitating Term Loan for MSME

Sitharaman declared in the Union Budget 2024–2025 that a credit guarantee program will be implemented to enable MSMEs to get term loans for the acquisition of machinery and equipment without the need for collateral or third-party guarantees. According to her, each applicant will receive a guarantee cover of up to INR 100 crore from a separately established self-financing guarantee fund; however, the loan amount may be higher.

In addition to a yearly guarantee cost on the lowered loan balance, the borrower will be required to pay an upfront guarantee fee. From INR 3.95 lakh crore in 2020–21 to INR 12.39 lakh crore in 2024–25, MSMEs’ exports have increased dramatically.

MSME Showing Remarkable Performance

Over the years, the MSME sector in India has made a substantial contribution to the GDP of the country by continuously exhibiting exceptional resilience and adaptability. MSMEs' Gross Value Added (GVA) as a percentage of India's GDP was 29.7% in 2017–18 and 30.1% in 2022–2023.

Nagaraju emphasised the significance of connecting microenterprises, self-help groups (SHGs), and rural producers with banking services and market prospects. India is a village-based country. "A lot of things in the country are actually driven by Grameen Bharat," he remarked. And all around the nation, villages are the new hubs of development.

He praised the government's main efforts to promote financial inclusion, pointing out that the Pradhan Mantri Jan Dhan Yojana (PMJDY) opened over 53 crore new bank accounts, with women from rural regions making up the bulk of the beneficiaries. Nagaraju further emphasised how SHGs help rural communities develop economic resilience and entrepreneurship.

The Scheme Aligns with Government’s Vision

The program supports the government's goal of boosting rural entrepreneurship. In order to realise the Vikshit Bharat goal, Nagaraju stressed the significance of concentrating on quality, export connections, capacity growth, and all-encompassing support.

The declaration emphasises the government's dedication to supporting sustainable economic growth and boosting MSMEs. The industry is well-positioned to boost local wealth and India's standing in international trade with an emphasis on innovation and growth.