Credit Guarantee Scheme for MSMEs to Accelerate Capacity Expansion, Productivity: CII's Budhia

The new credit guarantee scheme for the MSME sector covering loans up to Rs 100 crore will accelerate capacity expansion, enhance productivity, and improve the competitiveness of domestic industry, according to Sanjay Budhia, Chairman of the CII National Committee on EXIM.

On January 29, the government introduced the Mutual Credit Guarantee Scheme for MSMEs (MCGS- MSME). It aims at providing 60 per cent guarantee coverage by National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions (MLIs) for credit facility up to Rs 100 crore sanctioned to eligible MSMEs for purchase of equipment/machinery.

For availing of the scheme, the MSMEs (micro, small and medium enterprises) should fulfil certain conditions which include that the borrower should be an MSME with a valid Udyam Registration Number, the 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 the project cost.

Budhia said that industry chamber CII has consistently advocated for expanding credit guarantee coverage for MSMEs and exporters, emphasising the need for broader support mechanisms to boost exports.

With enhanced credit availability for fixed capital, MSMEs will be better equipped to integrate into global value chains, he said.

"By addressing this challenge, MCGS-MSME will accelerate capacity expansion, enhance productivity, and improve the competitiveness of Indian MSMEs in global markets," Budhia, who is also the Managing Director of PATTON Group, said.

He added that the scheme is a significant step towards strengthening the manufacturing sector.

Earlier, he stated that Indian exporters are grappling with significant liquidity challenges due to high interest rates and a decline in export finance, which are undermining their competitiveness.

According to FIEO (Federation of Indian Export Organisations), there is a decline of 5 per cent in export credit between March 2022 (Rs 2,27,452 crore) and March 2024 (Rs 2,17,406 crore).

Export credit under PSL (priority sector lending) on July 1, 2022, was Rs 19,861 crore and it declined to Rs 11,721 crore on June 28 this year, which is a dip of over 40 per cent, FIEO has said.