MSME Mutual Credit Guarantee Scheme: What 60% guarantee for up to Rs 100 crore credit facility means for small businesses

The Ministry of Finance on Tuesday, March 18, 2025, launched the Mutual Credit Guarantee Scheme for MSMEs to bolster access to finance for micro, small, and medium enterprises (MSMEs). This measure will provide 60 per cent guarantee coverage by the National Credit Guarantee Trustee Company Limited (NCGTC) to Member Lending Institutions for credit facility up to Rs 100 crore sanctioned to eligible MSMEs for purchase of equipment and machinery

State Finance Minister Pankaj Chaudhary told the Rajya Sabha that in order to be eligible for this scheme, MSMEs should have a valid Udyam Registration Number and should not be an NPA with any lender. Besides, the minimum cost of equipment and machinery is 75 per cent of the project cost.

This measure provides a substantial guarantee for loans extended by financial institutions, specifically for the acquisition of essential equipment and machinery.

The government aim is to facilitate investment in capital goods, thereby enhancing productivity and growth within the MSME sector. 

Concurrently, efforts are underway to streamline the tax framework, reducing the compliance burden and promoting clarity for smaller businesses and individual taxpayers alike.

A proposed legislative overhaul seeks to further simplify the tax code, fostering a more conducive environment for business operations.

Eligibility to claim Mutual Credit Guarantee Scheme

The scheme’s eligibility hinges on several factors as follows:

• It should be an MSME with valid Udyam Registration Number;
• It should not be an NPA with any lender;
• Minimum cost of equipment/machinery is 75 per cent of project cost