Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME)

Introduction of Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME): A Brief Insight

Every growing business needs modern machinery, better equipment and additional production capacity. However, arranging a large business loan and providing the required security can become difficult for many MSMEs. The Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME), launched by the Government of India, aims to address this problem. It provides a credit guarantee to lenders, encouraging them to offer machinery and equipment loans of up to ₹100 crore to eligible enterprises.

The Ministry of Finance introduced the scheme on 29 January 2025 to fulfil the announcement made in the Union Budget 2024-25. On 21 March 2026, the Government revised the scheme after considering the requirements of MSMEs and lending institutions.

The National Credit Guarantee Trustee Company Limited (NCGTC) implements the scheme. It provides credit guarantee coverage to eligible banks, finance companies and All India Financial Institutions that register under the scheme.

The main objective of MCGS-MSME is to make business loans more accessible for purchasing plant, machinery and equipment. It aims to strengthen manufacturing, encourage domestic production and help Indian enterprises expand their businesses. The scheme also brings medium enterprises within its coverage, giving them access to higher-value credit support.

Under the general category, NCGTC provides a guarantee of 60% of the amount in default on eligible loans of up to ₹100 crore. The total project cost can exceed ₹100 crore, but the guarantee coverage remains subject to the prescribed limit. At least 60% of the project cost must go towards plant, machinery and equipment. The earlier requirement was 75%. Loans of up to ₹50 crore can have a repayment period of up to 8 years, including a principal moratorium of up to 2 years.

To obtain the guarantee, the borrower must deposit an upfront contribution of 5% of the loan amount, subject to a maximum of ₹5 crore. Under the revised provisions, the borrower can receive a refund of 1% of the loan amount every year from the fourth year onwards, subject to satisfactory loan account performance. The lender also pays an annual guarantee fee, which is nil in the sanction year, 1.5% for the next three years and 1% from the fifth year onwards.

Micro, small and medium enterprises with valid Udyam registration can apply under the scheme. It covers eligible businesses in both manufacturing and service sectors. The revised scheme also introduces a special category for profitable exporters that earned at least 25% of their sales turnover from exports in each of the previous three financial years. Eligible exporters can obtain a loan of up to ₹20 crore with 75% guarantee coverage and an upfront contribution of only 2%, subject to a maximum of ₹40 lakh.

MSME owners cannot apply directly to NCGTC for the guarantee. They must approach a bank, NBFC or financial institution registered under the scheme and apply for an eligible machinery loan. The lender assesses the application, decides whether to sanction the loan and submits the guarantee request to NCGTC. The lender also decides whether collateral security is required, based on its credit assessment and applicable conditions.

For assistance, applicants can first contact the credit officer or relationship manager of their lending institution. They can also approach the NCGTC helpdesk in Mumbai. The contact address, email address and telephone numbers are provided in the contact section below.

Entrepreneurs who want to improve product quality, reduce manufacturing costs and adopt better production practices can also explore the MSME Champions Scheme. Those planning to establish a new business and seeking subsidy support can check the Prime Minister’s Employment Generation Programme (PMEGP).

Women and entrepreneurs belonging to Scheduled Caste and Scheduled Tribe communities can explore the Stand Up India Scheme. Eligible founders of recognised startups can also consider the Credit Guarantee Scheme for Startups.

Owners of micro and small enterprises who need smaller business loans or working capital facilities can explore the Credit Guarantee Scheme for Micro and Small Enterprises.

Manufacturers, service providers, exporters and other business owners looking for financial assistance and enterprise development programmes can explore the available schemes on our List of Welfare Schemes of the Central Government page.

Latest Update on Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME)

The Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) continues to provide credit guarantee support for eligible machinery and equipment loans. The Government modified the scheme in March 2026 to expand its coverage and make it more accessible to MSMEs. The following timeline highlights its major developments.

• Scheme Validity: The scheme will remain available for four years from 27 January 2025 or until cumulative guarantees of ₹7 lakh crore are issued, whichever comes first. Therefore, eligible loans must be sanctioned within this period.
• Modified Scheme Guidelines: MSMEs should check the revised operational guidelines available on the NCGTC website before applying. These guidelines explain the detailed conditions, guarantee fees and claim-related provisions.
• Guarantee Status: Applicants should contact NCGTC or their lending institution for the latest information about guarantees issued under the scheme and other implementation-related updates.
• Support for Exporters: Eligible profitable exporters can use the special MCGS-MSME provision to obtain machinery and equipment loans of up to ₹20 crore, subject to the prescribed conditions. Exporters seeking additional working capital can separately check their eligibility under Emergency Credit Line Guarantee Scheme (ECLGS) 5.0, which remains available until 31 March 2027 or until its guarantee limit is reached, whichever comes first.
• Why the 2026 Modifications Matter: The inclusion of service enterprises and reduction in the machinery investment requirement have expanded the scheme’s coverage. The refundable upfront contribution also provides financial relief to eligible borrowers who maintain satisfactory loan accounts.
• Prepare Before Applying: MSMEs should complete their Udyam registration, prepare a project report, collect machinery quotations and contact an NCGTC-registered lender to discuss loan eligibility.

Benefits Provided to Eligible Beneficiaries

Micro, small and medium enterprises often need expensive machinery, modern equipment and production facilities to expand their businesses. However, arranging a large loan and providing collateral security can become a major challenge. The Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) addresses this problem by providing credit guarantee support to eligible lenders for term loans of up to ₹100 crore. This encourages banks and financial institutions to finance MSME projects involving plant, machinery and equipment.

Benefits Available to MSME Enterprises

• Eligible MSMEs can obtain a term loan for purchasing plant, machinery and equipment, with guarantee coverage of up to ₹100 crore.
• Both micro, small and medium enterprises can benefit from the scheme, including manufacturing and service-sector businesses.
• The total project cost can exceed the guaranteed loan amount, allowing enterprises to undertake larger expansion projects.
• Loans of up to ₹50 crore can have a repayment period of up to 8 years, including a principal moratorium of up to 2 years.
• The scheme reduces the need for collateral security, although the lending institution decides whether to require additional security.
• Only 60% of the project cost must be allocated to plant, machinery and equipment, compared with the earlier requirement of 75%.
• The borrower can receive a refund of 1% of the loan amount every year from the fourth year onwards, subject to satisfactory loan account performance.
• Eligible exporters can receive higher guarantee coverage of 75%, with an upfront contribution of only 2% of the loan amount.

Benefits Available to Banks and Financial Institutions

• NCGTC provides 60% guarantee coverage on the amount in default under the general category and 75% under the special exporter category.
• Lenders can extend financial support to medium enterprises along with micro and small enterprises.
• Scheduled commercial banks, NBFCs and All India Financial Institutions can access the guarantee after completing the required registration formalities.
• The guarantee period extends up to 10 years, supporting long-term machinery and equipment financing.

MCGS-MSME Guarantee Coverage at a Glance

Annual Guarantee Fee Structure

Understanding the Financial Benefits Through Examples

Example 1: General Category

Suppose an MSME takes a machinery loan of ₹40 crore under the general category. It must deposit an upfront contribution of 5%, which comes to ₹2 crore. This amount falls within the maximum contribution limit of ₹5 crore.

From the fourth year onwards, the enterprise can receive a refund of 1% of the loan amount every year, which equals ₹40 lakh annually, subject to the applicable repayment conditions.

Suppose the outstanding loan amount on 31 March is ₹36 crore. At a guarantee fee rate of 1.5%, the annual fee comes to approximately ₹54 lakh. If the loan account later defaults with ₹10 crore in the amount in default, the 60% guarantee coverage would amount to ₹6 crore, subject to the applicable claim conditions.

Example 2: Special Category for Exporters

Suppose a profitable exporter obtains a loan of ₹20 crore under the special category. The borrower must deposit an upfront contribution of 2%, which comes to ₹40 lakh.

If the outstanding loan amount is ₹20 crore, the annual guarantee fee at 0.50% would be approximately ₹10 lakh. The lender can receive 75% guarantee coverage on the amount in default, subject to the scheme’s claim conditions.

Difference Between the Original and Revised Scheme

Difference Between MCGS-MSME and the Credit Guarantee Scheme for Micro and Small Enterprises

Reach and Scope of the Scheme

• The scheme remains available for eligible loans sanctioned within four years from 27 January 2025, or until NCGTC issues guarantees amounting to ₹7 lakh crore, whichever occurs earlier.
• The scheme aims to strengthen the manufacturing sector by helping businesses invest in modern machinery, expand production and improve their operational capacity.
• It also supports the wider MSME sector, which contributes significantly to India’s economy, exports and employment generation.

How MCGS-MSME Helps Business Owners

• Businesses can purchase modern machinery and equipment without arranging the entire investment from their own funds.
• Enterprises can plan larger expansion and modernisation projects with access to higher-value term loans.
• The principal moratorium can give businesses time to install machinery, begin operations and generate revenue before starting principal repayment.
• Eligible borrowers can recover part of their upfront contribution by maintaining satisfactory loan account performance.
• Businesses can improve production capacity, adopt better technology, strengthen competitiveness and create additional employment opportunities.

Important Points MSME Owners Should Know

• The credit guarantee protects the lender against eligible loan defaults. It does not waive the borrower’s responsibility to repay the loan.
• The scheme does not guarantee automatic loan approval. The lender assesses the project, financial position and repayment capacity before sanctioning the loan.
• Collateral requirements depend on the lending institution’s credit assessment and applicable scheme conditions.
• The refund of the upfront contribution depends on the prescribed loan account performance conditions.
• MCGS-MSME covers eligible term loans for plant, machinery and equipment. Businesses requiring working capital finance must explore other suitable credit facilities.
• Never pay an agent or middleman for loan approval or guarantee coverage.

Eligibility Conditions Required to be Fulfilled

The Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) supports eligible micro, small and medium enterprises (MSMEs) that need a term loan to purchase plant, machinery or equipment. The scheme provides credit guarantee coverage to eligible lenders, helping MSMEs access finance for business expansion, modernisation and development.

Both manufacturing and service-sector MSMEs can now apply under the scheme. However, the enterprise, proposed project, loan and lending institution must meet the prescribed eligibility conditions.

Who Can Apply for the Scheme?

• Micro, small and medium enterprises with a valid Udyam Registration Number.
• Both new and existing manufacturing-sector MSMEs.
• Service-sector MSMEs, which became eligible under the revised guidelines issued in March 2026.
• Enterprises that do not have an account classified as a Non-Performing Asset (NPA) with any lender.
• Newly established businesses and existing units, subject to the lender’s credit assessment and scheme conditions.

Eligibility Conditions for the Loan

• The loan must be a term loan for purchasing plant, machinery or equipment.
• The maximum loan amount eligible for guarantee coverage is ₹100 crore per project. A project loan can exceed ₹100 crore, but the guarantee remains limited to the prescribed amount.
• At least 60% of the total project cost must be allocated to plant, machinery or equipment. The earlier requirement was 75%.
• The scheme provides 60% guarantee coverage on the amount in default for eligible loans.
• Loans up to ₹50 crore can have a repayment period of up to 8 years, including a principal moratorium of up to 2 years. Lenders may consider longer repayment and moratorium periods for loans above ₹50 crore.
• The borrower must deposit an upfront contribution of 5% of the loan amount, subject to a maximum of ₹5 crore.
• The upfront contribution becomes refundable at the rate of 1% of the loan amount each year from the fourth year onwards, subject to satisfactory performance of the loan account.
• The applicable interest rate follows RBI guidelines and the lending institution’s approved policy. The scheme does not prescribe a separate fixed interest rate.

Eligibility Conditions for Exporters Under the Special Track

Profitable MSME exporters can access a separate facility under MCGS-MSME with a higher guarantee coverage and different upfront contribution requirements. They must fulfil the following conditions:

• The enterprise must have remained profitable during each of the previous three financial years.
• Exports must account for at least 25% of the total sales turnover in each of the previous three financial years.
• The enterprise must fulfil the prescribed conditions for the realisation of export proceeds.
• The maximum guaranteed loan amount under this special track is ₹20 crore.
• The scheme provides 75% guarantee coverage on the amount in default.
• The borrower must deposit an upfront contribution of 2% of the loan amount, subject to a maximum of ₹40 lakh.
• The scheme refunds 1% of the loan amount in each of the fourth and fifth years, subject to the applicable conditions.
• The annual guarantee fee is nil during the first year and 0.50% of the outstanding loan amount in subsequent years.

Scheme Validity and Guarantee Period

• The scheme applies to eligible loans sanctioned within four years from the date of issue of its operational guidelines, or until NCGTC issues cumulative guarantees of ₹7 lakh crore, whichever occurs earlier.
• The guarantee coverage for an eligible loan expires after 10 years under the revised provisions.
• The Government launched MCGS-MSME in January 2025 and revised its provisions on 21 March 2026. Applicants must fulfil the conditions applicable to their loan sanction and guarantee coverage.

Who Cannot Apply Under MCGS-MSME?

• Enterprises that do not have a valid Udyam Registration Number.
• Enterprises whose loan accounts are classified as NPAs with any lender.
• Businesses applying for working capital finance instead of a term loan for plant, machinery or equipment.
• Projects where plant, machinery and equipment account for less than 60% of the total project cost.
• Enterprises seeking guarantee coverage beyond the prescribed limit of ₹100 crore under the general scheme.
• Businesses applying through a lending institution that is not registered with NCGTC under the scheme.
• Exporters who fail to meet the special track conditions cannot claim its additional benefits, including the 75% guarantee coverage and the ₹20 crore guaranteed loan facility. They may still qualify under the general scheme if they meet its eligibility conditions.

Which Banks and Financial Institutions Can Provide Loans?

Only eligible lending institutions registered with NCGTC can obtain guarantee coverage under MCGS-MSME. These include:

• Scheduled Commercial Banks (SCBs).
• All India Financial Institutions (AIFIs).
• Non-Banking Financial Companies (NBFCs).
• Other lending institutions covered under the applicable scheme guidelines.

The lending institution must complete the registration formalities with NCGTC and enter into the required agreement or undertaking before using the guarantee facility. The lender also decides whether to ask the borrower for collateral security, based on its credit assessment and applicable scheme conditions.

Important Points to Check Before Applying

• Make sure your enterprise has a valid Udyam Registration Number.
• Check whether your business falls under the manufacturing or service sector.
• Prepare a project report showing that at least 60% of the project cost goes towards plant, machinery or equipment.
• Check your existing loan accounts and make sure none of them is classified as an NPA.
• If you are an exporter, verify your profitability, export turnover and export realisation for the previous three financial years.
• Confirm that your chosen bank or financial institution is registered with NCGTC under MCGS-MSME.
• Ask the lender about the upfront contribution, interest rate, collateral requirements and repayment schedule before accepting the loan.
• Micro and small enterprises looking for smaller business loans or working capital assistance can also explore the credit guarantee schemes available through NCGTC, subject to their respective eligibility conditions.
• Do not pay any agent or middleman for loan approval or guarantee coverage.

Documents Required to be Attached

Businesses applying for a loan under the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) must submit documents related to their business registration, project, machinery purchase and financial position. The lender may also ask for additional documents depending on the nature of the business and the loan amount.

Business Identity and Registration Documents

• Valid Udyam Registration Certificate
• Business PAN Card
• GST Registration Certificate, if applicable
• Business constitution documents, such as proprietorship proof, partnership deed, LLP agreement or Certificate of Incorporation
• Aadhaar Card, PAN Card and address proof of the proprietor, partners or directors
• Business licences and approvals, wherever applicable

Project and Machinery Documents

• Detailed Project Report (DPR)
• Project cost and financing details
• Machinery and equipment quotations or pro forma invoices
• Details of machinery, equipment, make, model and purchase cost
• Documents showing the proposed use of machinery and equipment in the business
• Details of the project cost allocated to plant, machinery and equipment
• Details of the remaining project cost and its proposed funding source, if applicable
• Additional equipment details for service-sector enterprises, wherever applicable

Financial Documents

• Audited balance sheets and profit and loss statements for the previous financial years
• Income Tax Returns (ITRs) of the business
• Bank statements of the enterprise for the last 12 months
• Bank statements of promoters, if required by the lender
• Sales records and details of existing business orders
• Details of existing loans and their repayment status
• Loan sanction letters and repayment statements, if applicable

Documents Related to Loan and Credit History

• Credit report of the enterprise and its promoters, wherever required
• Declaration regarding existing loan accounts and NPA status
• Details of outstanding loans and other credit facilities

Property Documents, If Collateral Is Required

• Property ownership or title documents
• Property valuation report
• Other property-related documents requested by the lending institution

Documents Related to the Upfront Contribution

• Proof of payment of the applicable upfront contribution
• Receipt or transaction details of the contribution deposited through the lender
• Loan repayment records required for the applicable contribution refund

Additional Documents for Exporters Under the Special Track

• Export turnover statements for the previous three financial years
• Audited financial statements showing profitability during the relevant years
• Export invoices and documents showing realisation of export proceeds
• Other export-related documents required by the lender

How Beneficiaries Can Apply to Avail the Benefit of this Scheme

You cannot apply directly to the National Credit Guarantee Trustee Company Limited (NCGTC) for the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME). Instead, you must approach a bank, finance company or financial institution and apply for a term loan to purchase plant, machinery or equipment. If the lender approves your loan and finds it eligible under the scheme, it applies to NCGTC for the credit guarantee.

Let us understand this with a simple example. Suppose you want to buy a machine for your business but the bank is worried about what will happen if you cannot repay the loan. Under this scheme, NCGTC provides a guarantee to the bank. This means that if your loan defaults, NCGTC covers a prescribed part of the lender’s loss, subject to the scheme rules. This support gives the lender more confidence to finance your project.

You also have to deposit an upfront contribution when the lender applies for the guarantee. You can receive a partial refund of this contribution from the fourth year onwards if your loan account meets the prescribed performance conditions. Your main responsibility is to prepare a good project report, arrange the required documents and approach a registered lender. Follow the steps below to understand the complete application process. If you need a smaller loan for a micro or small enterprise, you can also read our guide to the Credit Guarantee Scheme for Micro and Small Enterprises.

Before You Start

Step 1: Check whether your business is registered as a micro, small or medium enterprise and operates in the manufacturing or service sector. You must need a term loan to purchase eligible plant, machinery or equipment.

Step 2: Complete your enterprise registration through the Udyam Registration Portal. Keep your Udyam Registration Certificate ready because the scheme requires a valid Udyam registration.

Step 3: Prepare a list of the machinery and equipment you want to purchase. Contact the sellers and collect quotations mentioning the machine’s name, make, model and price.

Step 4: Calculate the total cost of your project. Make sure that at least 60% of the project cost goes towards purchasing plant, machinery and equipment.

Step 5: Calculate how much loan you need and how much money you can arrange yourself. The guarantee under the general category covers an eligible loan amount of up to ₹100 crore. Your total project cost can be higher than this amount.

Step 6: Prepare a project report explaining what your business does, which machines you want to purchase, how much the project will cost and how you plan to repay the loan. Include your expected sales, income, expenses and employment opportunities wherever applicable.

Step 7: Arrange all the required documents, including your Udyam Registration Certificate, PAN, GST registration, business registration papers, financial statements and bank statements. Check the Documents Required section of this guide for the complete list.

Step 8: Check the latest scheme conditions before approaching a lender. Pay particular attention to the changes introduced in March 2026, including the inclusion of service-sector enterprises and the reduction in the minimum machinery investment requirement from 75% to 60%.

Find a Registered Lender First

Step 1: Visit the MCGS-MSME page on the NCGTC website.

Step 2: Find the list of lenders registered under the scheme. A bank or financial institution must complete the required registration formalities with NCGTC before it can use the guarantee facility.

Step 3: Check which registered banks, NBFCs and financial institutions operate in your area. You can also give preference to a lender with which your business already has a banking relationship.

Step 4: Contact the selected lender and confirm whether it provides machinery loans under MCGS-MSME. Do not assume that every branch of a registered bank or every finance company offers this facility.

Method 1: Go to a Bank

Step 1: Choose a scheduled commercial bank from the registered lender list. You can approach a public-sector or private-sector bank that offers loans for business expansion and machinery purchases.

Step 2: Visit the bank branch and meet the branch manager or the officer handling business loans. Clearly explain that you want a term loan under the Mutual Credit Guarantee Scheme for MSMEs.

Step 3: Submit your project report, machinery quotations and required business documents. Ask the bank to acknowledge your application and provide an application or reference number.

Step 4: Confirm whether the bank will cover your proposed loan under MCGS-MSME. Also ask whether it requires collateral security for your project.

Step 5: Ask the bank to explain the interest rate, repayment period, moratorium, processing charges and other applicable fees. Get these details in writing before accepting the loan offer because the scheme does not prescribe a fixed interest rate.

Step 6: Answer the bank’s questions and provide any additional documents it requests. The bank will examine your business, project cost, repayment capacity and credit history before deciding whether to approve the loan.

Method 2: Go to a Finance Company

Step 1: Select a registered Non-Banking Financial Company (NBFC) that provides business loans for machinery, equipment or project expansion.

Step 2: Contact the company and explain that you want a term loan under MCGS-MSME. Confirm that it is registered with NCGTC for this scheme.

Step 3: Submit your project report, machinery quotations and other required documents.

Step 4: Ask the company for the interest rate, repayment period, moratorium, processing charges and other loan conditions in writing.

Step 5: Compare its loan offer with the offers available from banks or other registered lenders before making your final decision.

Method 3: Go to a Financial Institution

Step 1: Check the registered lender list for eligible All India Financial Institutions that participate in the scheme.

Step 2: Contact the institution and ask whether it provides loans directly to MSMEs or works through other lending institutions.

Step 3: If it provides loans for projects like yours, explain your machinery requirements and ask about the application process.

Step 4: Submit your project report and required documents. Follow the same loan application and verification process that applies when you approach a bank.

Method 4: Ask Your Existing Lender

Step 1: Contact the bank or finance company where your business already maintains an account or has an existing loan.

Step 2: Ask your relationship manager whether the lender is registered with NCGTC under MCGS-MSME.

Step 3: If the lender participates in the scheme, explain your machinery purchase or business expansion plan and request a new term loan under MCGS-MSME.

Step 4: Submit your project report and other required documents for assessment.

Step 5: If your existing lender does not participate in the scheme, approach another registered lender from the NCGTC list.

Method 5: If You Are a Profitable Exporter

Step 1: Check whether your enterprise meets the special conditions for exporters. Your business must be profitable and its exports must account for at least 25% of total sales in each of the previous three financial years.

Step 2: Collect documents showing your export turnover, audited financial results and details of export payments received. These documents will help the lender verify your eligibility.

Step 3: Approach a registered lender and clearly request the special exporter category under MCGS-MSME. This category provides a guaranteed loan of up to ₹20 crore with 75% guarantee coverage and an upfront contribution of 2%, subject to a maximum of ₹40 lakh.

Step 4: Ask the lender for the complete list of documents required to verify your export turnover and realisation of export proceeds.

Step 5: Submit the required documents and complete the lender’s verification process. The lender will check whether your business meets all the conditions of the special category.

Method 6: If You Run a Service Sector Enterprise

Step 1: Check whether your enterprise operates in the service sector and needs a term loan to purchase eligible machinery or equipment. The revised scheme also covers eligible service-sector enterprises.

Step 2: Prepare a list of the equipment you want to purchase. Explain how each item will help your business provide services, increase capacity or improve its operations.

Step 3: Collect quotations from equipment suppliers and prepare your project report. Make sure that the project meets the minimum 60% machinery and equipment investment requirement.

Step 4: Approach a registered lender and explain that you operate a service-sector enterprise. Submit your documents and apply for the term loan under MCGS-MSME.

Method 7: If You Run a Medium Enterprise

Step 1: Check your Udyam Registration Certificate to confirm that your business falls under the medium enterprise category.

Step 2: Prepare your project details, machinery quotations and financial documents. The scheme covers eligible medium enterprises along with micro and small enterprises.

Step 3: Approach a registered lender and explain your project requirements. The guarantee under the general category can cover an eligible loan amount of up to ₹100 crore.

Step 4: Remember that your total project cost can exceed ₹100 crore. However, the guarantee coverage under the general category remains subject to the ₹100 crore limit.

The Upfront Contribution, Your Initial Payment

Step 1: Ask your lender how much upfront contribution you need to deposit. Under the general category, it is 5% of the loan amount, subject to a maximum of ₹5 crore. Under the special exporter category, it is 2%, subject to a maximum of ₹40 lakh.

Step 2: Arrange the required amount before the lender applies for the guarantee. The lender deposits this contribution with NCGTC as part of the guarantee registration process.

Step 3: Keep the payment receipt and other related records safely. You may need them when you ask about the refund later.

Step 4: Understand the refund conditions. Under the general category, you can receive a refund of 1% of the loan amount every year from the fourth year onwards. Under the exporter category, the refund is 1% in each of the fourth and fifth years. Both refunds depend on the prescribed loan account performance conditions.

What Happens at the Lender

After you submit your application, the lender checks your business and project details. You should understand the following steps so that you know what happens to your application.

Step 1: The lender checks your project report, financial documents, bank statements and credit history. It may also ask for additional information if something is missing.

Step 2: If the lender finds your project suitable and your repayment capacity satisfactory, it may approve and sanction the term loan.

Step 3: The lender decides whether to ask for collateral security, depending on its credit assessment and applicable rules. It must communicate the loan conditions to you.

Step 4: Read the sanction letter carefully. Check the approved loan amount, interest rate, repayment schedule, moratorium, collateral conditions and other charges before signing it.

Step 5: After completing the loan formalities, purchase the machinery and equipment according to the approved project. Keep the invoices, payment receipts and other purchase records safely.

What the Lender Does With NCGTC

You do not need to complete these steps yourself. The lender handles the guarantee application with NCGTC after approving your loan. However, knowing the process will help you understand how the scheme works.

Step 1: The lender must complete the required agreement or undertaking formalities with NCGTC before using the guarantee facility.

Step 2: The lender submits the guarantee application through the NCGTC portal and deposits the applicable upfront contribution.

Step 3: The lender pays the applicable annual guarantee fee according to the scheme rules. Under the general category, the fee is nil in the sanction year, 1.5% for the next three years and 1% from the fifth year onwards. Under the special exporter category, the fee is nil in the sanction year and 0.50% thereafter.

After You Get the Loan

Step 1: Use the loan amount for the machinery, equipment and project approved by the lender. Keep all purchase bills and payment records.

Step 2: Install the machinery and start your business operations. If your loan includes a principal moratorium, use this period to set up the project and begin generating income. Remember that a moratorium on principal repayment does not automatically mean that you do not have to pay interest.

Step 3: Pay your loan instalments on time. The guarantee protects the lender against a prescribed part of the eligible default, but you remain responsible for repaying the full loan.

Step 4: From the fourth year, contact your lender to check your eligibility for the refund of the upfront contribution. Ask about the applicable conditions and keep your repayment records ready.

Step 5: If your business faces financial difficulties, contact your lender immediately. Discuss the problem before missing instalments or allowing the loan account to deteriorate.

If the Lender Says No

Step 1: Ask the lender to explain why it rejected your application. Request the reason in writing so that you can understand the problem.

Step 2: Check whether the rejection happened because of missing documents, an incomplete project report, poor credit history or insufficient repayment capacity. Correct the problem wherever possible.

Step 3: You can approach another registered lender and submit a fresh application. Different lenders may assess your project differently, but approval is never guaranteed.

Step 4: If you are planning to start a new business and need financial assistance with a subsidy, check the Prime Minister’s Employment Generation Programme (PMEGP) as another option, subject to its eligibility conditions.

If You Need Help

Step 1: Contact your bank’s branch manager, relationship manager or business loan officer first. Ask them about your application status, guarantee coverage and pending formalities.

Step 2: For information about the scheme, check the NCGTC guide to the scheme.

Step 3: If you need clarification about the guarantee process, contact NCGTC through the details available on its official contact page.

Important: You cannot apply directly to NCGTC for MCGS-MSME. You must approach a registered lender, and the lender submits the guarantee application. Do not pay any agent or middleman who promises guaranteed loan approval or guarantee coverage. Also, compare the interest rates and other charges offered by different lenders because MCGS-MSME does not prescribe a fixed interest rate.

Important Links Available of the Scheme

• MCGS-MSME Official Scheme Details and List of Registered Lenders, NCGTC
• MCGS-MSME Scheme Approval and Loan Guarantee Details, Ministry of Finance
• Latest MCGS-MSME Scheme Amendments, Service Sector Inclusion and Special Exporter Category, March 2026
• MCGS-MSME FAQs, Upfront Contribution, Collateral and Interest Rate Details, NCGTC
• Udyam Registration Portal, Ministry of MSME
• NCGTC Contact Details for Scheme-Related Queries and Assistance

Contact Details in Case of Help Needed

• Office: National Credit Guarantee Trustee Company Limited (NCGTC), Ministry of Finance, 1410, 14th Floor, Parinee Crescenzo, Plot No. C-38 and C-39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra – 400051
• MCGS-MSME Helpdesk Email: mcgsmsme@ncgtc.in
• MCGS-MSME Helpdesk Phone: 022-69035634, 022-69035625 and 022-69035611
• Board Number: 022-69035600
• General Email: info@ncgtc.in
• Grievance Email: grievance@ncgtc.in
• Your Lender: The corporate credit officer or the relationship manager of the bank, finance company or financial institution where you apply, who decides on your loan and who asks NCGTC for the guarantee

Frequently Asked Questions (FAQs)

Tabassum

Tabassum is a government schemes researcher and writer with 5 years of experience tracking Central and State welfare scheme programmes across India. She has covered 500+ schemes spanning agriculture, women welfare, education, and housing, helping lakhs of beneficiaries understand their entitlements in simple language.