New Delhi: The government is all set to launch a collateral-free term loans scheme for micro, small and medium enterprises (MSMEs) to boost their manufacturing capabilities, finance minister Nirmala Sitharaman said on Saturday, adding that the scheme will be placed before the Cabinet soon.
After the success of the working capital loan facility – the Emergency Credit Line Guarantee Scheme (ECLGS) – that saved millions of MSMEs from sinking into the red by providing them liquidity during the Covid period, the government is launching a term-loan facility for them to purchase modern plant and machinery. As on December 2023, ECLGS issued guarantees to over 1.19 crore borrowers involving ₹3.68 lakh crore.
Sitharaman on Saturday said while MSMEs received easy working capital loans, they faced problems in getting term-loans. While the proposed scheme will cover collateral-free guarantee for term-loan up to 100 crore, a unit may borrow even more from banks, she said while addressing the industry. “You don’t even need a third-party guarantee, no collateral, no third-party guarantee,” she added.
The proposed scheme is part of the five key budget proposals to boost the MSME sector. “This budget provides special attention to MSMEs and manufacturing, particularly labour-intensive manufacturing. We have formulated a package covering financing, regulatory changes and technology support for MSMEs to help them grow and also compete globally, as mentioned in the interim budget,” the FM said while announcing specific measures during her Budget speech on July 23.
The budget speech said a credit guarantee scheme for MSMEs in the manufacturing sector would be introduced. “The scheme will operate on pooling of credit risks of such MSMEs. A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to ₹100 crore, while the loan amount may be larger. The borrower will have to provide an upfront guarantee fee and an annual guarantee fee on the reducing loan balance,” she said that day.
