The Indian government has officially introduced the ‘Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME)’, a key initiative announced in the Union Budget 2025-26 aimed at strengthening the micro, small, and medium enterprises (MSME) sector.
This scheme will enable MSMEs to secure collateral-free loans of up to ₹100 crore for purchasing essential plant, machinery, or equipment required for business expansion and growth.
Under the scheme, the National Credit Guarantee Trustee Company Ltd (NCGTC) will provide 60% guarantee coverage to member lending institutions (MLIs) for loans sanctioned under MCGS-MSME.
Loan Amount: The guaranteed loan amount cannot exceed ₹100 crore, though the total project cost may be higher.
Purpose: At least 75% of the project cost should be allocated for purchasing equipment or machinery.
During the launch event in Mumbai, Finance Minister Nirmala Sitharaman personally distributed sanction letters to MSMEs eligible under the scheme.
She emphasized that this initiative will significantly improve access to credit for MSMEs, thereby boosting the manufacturing sector in India.
In addition to launching the MSME credit scheme, FM Sitharaman, along with Minister of State for Finance Pankaj Chaudhary, handed over the keys to homebuyers who benefited from the Special Window for Affordable and Mid-Income Housing (SWAMIH) Fund.
As of January 24, 2025, the SWAMIH Fund has successfully delivered over 50,000 homes to homebuyers.
The fund is committed to delivering 20,000 more homes annually for the next three years.
To accelerate housing project completions, the government has introduced SWAMIH Fund 2, a new blended finance facility supported by:
✅ Government contributions
✅ Banks
✅ Private investors
This fund has been allocated ₹15,000 crore to expedite the completion of an additional 1 lakh housing units across India.
During a media interaction at the event, FM Sitharaman reaffirmed the government’s strong focus on MSMEs over the last three Budgets. She highlighted the introduction of government-guaranteed loans as part of the Union Budget 2025-26.
She further clarified that the government is not shifting focus from capital expenditure to consumption expenditure, ensuring a balanced economic growth approach.
Finance Minister Sitharaman also announced that the government is working on major reforms in the insurance sector.
Key updates include:
The Foreign Direct Investment (FDI) limit for insurance companies will be raised from 74% to 100%.
The government will introduce financial safeguards to ensure that Indian citizens’ insurance premium payments remain within the country.
These measures aim to attract more foreign investments, strengthen the insurance industry, and provide better financial security to policyholders.
The launch of the Mutual Credit Guarantee Scheme for MSMEs and the expansion of the SWAMIH Fund mark significant steps toward strengthening India’s economic landscape. By providing collateral-free loans up to ₹100 crore, the government is fostering financial inclusion and business growth for MSMEs, a crucial sector driving employment and innovation.
Simultaneously, the SWAMIH Fund’s expansion ensures the timely delivery of affordable and mid-income housing, benefiting thousands of homebuyers across the country. With ₹15,000 crore allocated for SWAMIH Fund 2, the initiative will help expedite the completion of 1 lakh housing units, reinforcing the government’s commitment to infrastructure and real estate development.
Additionally, the proposed insurance sector reforms aim to attract higher foreign investment while ensuring policyholder security. These strategic initiatives reflect the government's long-term vision for economic resilience, supporting both businesses and consumers in a rapidly evolving financial ecosystem.