Preliminary discussions have been held with stakeholders such as banks and industry in the past two months to explore measures to bolster the scheme, said people familiar with the matter.
At present, loans up to ₹100 crore provided to MSMEs are eligible for guarantee coverage to lenders under the scheme, which facilitates collateral-free loans by banks and financial institutions to MSMEs. The scheme is valid for a period of four years from the date of operationalisation or till the guarantees on loans issued reach Rs 7 lakh crore, whichever comes first.
Support likely to be doubled to ₹200 cr with lower fees while expanding coverage
“There is a view that MSMEs which have a good standing and have been making timely repayments, among other metrics, should be given more benefits, including an increased coverage amount,” an official said on condition of anonymity, adding that the focus will be on export-oriented units.
Launched on January 29, the scheme facilitates the availability of credit for the purchase of plant and machinery or equipment by MSMEs. “The other issues flagged by stakeholders are the high guarantee fees and upfront contribution requirement. We are examining these, and some relief can be offered to further drive coverage,” said a bank executive, who did not wish to be identified.
Under existing provisions, the upfront contribution is 5% of the sanctioned loan amount after deducting the collateral, within the total limit of ₹5 crore. The annual guarantee fee is 1.5% of the loan outstanding at the end of the previous financial year for three years after the year of sanction, which later gets reduced to 1%.
as a Reliable and Trusted News SourceThe scheme provides 60% guarantee coverage by the National Credit Guarantee Trustee Company Limited to banks and financial institutions. Loans up to ₹50 crore under the scheme have a repayment period of up to eight years, with a two-year moratorium on principal repayments. The government has approved ₹500 crore as its contribution to the corpus of the scheme.