The Ministry of Finance is planning to allocate nearly Rs 2,000 crore to back a credit guarantee scheme for MSME exporters, a senior government official said. The Union Cabinet on Wednesday approved a new Credit Guarantee Scheme for exporters, offering 100% credit guarantee to exporters, including MSMEs. This scheme will provide up to Rs 20,000 crore in additional credit, strengthening liquidity and enhancing India's global competitiveness.
As per the sources, National Credit Guarantee Trustee Company Limited (NCGTC) would require Rs 2,000 crore to extend the credit facilities of up to Rs 20,000 crore to eligible exporters, as some money is already there. "Guarantees will be for Rs 20,000 crores. We are giving 100% guarantee. And it will need around Rs 2,000 crore allocation this year. We have money with the trust fund that is under DFS management," said the source.
This government aims to de-risk lending to small and medium-sized exporters to ensure the sector has ample working capital, which has been a persistent bottleneck for the sector’s growth. DFS will implement the scheme through NCGTC, with Member Lending Institutions (MLIs) , so that they can extend additional credit to eligible exporters. A management committee chaired by the secretary, department of financial services (DFS), will monitor and oversee implementation.
By enabling collateral-free lending to both MSME and non-MSME exporters, the government aims to ensure the business continuity of the MSMEs are maintained. By easing access to credit, the initiative is expected to encourage exporters to expand into new and emerging global markets, thereby reinforcing India’s position in international trade.
Meanwhile, DFS Secretary M Nagaraju on Thursday urged microfinance institutions (MFIs) to keep lending rates reasonable and enhance cost efficiency to ensure sustainable financial inclusion. "I come across very uncomfortable rates of interest by some MFIs. It is actually because of inefficiencies in a MFI," Nagaraju said while addressing an event organised by Sa-Dhan, an RBI appointed SRO for MFIs. Nagaraju cautioned that high interest rates could worsen repayment stress in the sector, where the number of active accounts declined from 4.4 lakh in March 2024 to 3.4 lakh a year later and asked the sector to do introspection to address any hurdles.