MSME Mutual Credit Guarantee Scheme (MCGS): 60% Guarantee for Loans Upto Rs. 100 Crore

The Government of India has launched the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME), aimed at providing a significant boost to Micro, Small, and Medium Enterprises by enabling them to access large-scale credit facilities. Under this scheme, eligible MSMEs can avail credit facilities up to ₹100 crore with a 60% government-backed guarantee. The scheme is implemented through the National Credit Guarantee Trustee Company Limited (NCGTC), a wholly owned entity under the Department of Financial Services, Ministry of Finance. In this article, let’s discuss the Mutual Credit Guarantee Scheme for MCGS, its eligibility criteria, and the benefits it provides. 

Key Features of the Mutual Credit Guarantee Scheme for MSMEs

• Guarantee Coverage: The scheme offers a 60% government-backed guarantee on loans sanctioned by Member Lending Institutions (MLIs), including Scheduled Commercial Banks (SCBs), All India Financial Institutions (AIFIs), and Non-Banking Financial Companies (NBFCs).
• Purpose: The credit facility is specifically designed for financing equipment and machinery purchases, ensuring MSMEs can enhance operational efficiency and contribute to economic growth.
• Implementation: The scheme is managed by the National Credit Guarantee Trustee Company Limited (NCGTC), a wholly owned entity under the Department of Financial Services, Ministry of Finance.

Eligibility Criteria for MSMEs to Avail the Scheme

To avail of benefits under the Mutual Credit Guarantee Scheme (MCGS-MSME), MSMEs must meet the following conditions:

• It must be an MSME with a valid Udyam Registration Number.
• Ensure that there are no overdue loan repayments with any lender.
• The minimum cost of equipment or machinery constitutes at least 75% of the total project cost.

Process for Loan Approval and Guarantee Coverage

Once an eligible MSME secures a loan from an MLI:

• The lending institution submits loan details on the NCGTC portal, along with applicable fees.
• Upon verification, NCGTC confirms guarantee coverage for the loan, providing lenders with a safety net that encourages increased lending to MSMEs.

Also read: MSME New Definition 2025: Revised Investment & Turnover Limits

Recent Tax Measures Supporting MSMEs

In addition to launching the MCGS-MSME scheme, the government has introduced several tax-related measures to reduce the compliance burden on small businesses and individual taxpayers. These include:

• Presumptive taxation provisions under Sections 44AD and 44AE of the Income-tax Act.
• Relaxations under Section 44AB related to tax audits.
• Omission of Tax Collected at Source (TCS) on the sale of specified goods under Section 206C.
• Rationalisation of Tax Deducted at Source (TDS) rates.
• A proposal for a simplified and concise Income-tax Bill, 2025, aimed at making tax provisions more understandable and business-friendly.

Key Takeaways for MSME Business Owners

• The MCGS-MSME scheme offers a 60% government-backed guarantee on loans up to ₹100 crore.
• The credit facility is focused on financing equipment and machinery purchases, with at least 75% of the project cost allocated for these assets.
• MSMEs must have a valid Udyam Registration and no overdue loan repayments to qualify.
• Loans can be availed through SCBs, AIFIs, and eligible NBFCs, with guarantees processed via the NCGTC portal.
• This initiative complements recent tax reforms that simplify compliance, reduce audits, and promote ease of doing business for small enterprises.

FAQs on MSME Mutual Credit Guarantee Scheme (MCGS)

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