Page 28 - Banking Finance May 2025

ARTICLE

Banks and NBFCs must carefully monitor MSME accounts is only permissible if legal proceedings have been initiated
and report any changes in borrower status. If an account and at least one year has elapsed since their commence-
marked as NPA returns to Standard classification, the lender ment. The OTS proposal must also comply with other scheme
must refund the claim amount and re-initiate the guaran- guidelines and be deemed reasonable under the lender's
tee coverage. Board-approved policy. These measures help maintain ac-
countability in the claims process and ensure fair financial
The invocation of a guarantee claim under MCGS-MSME support to deserving MSMEs while safeguarding the Trust's
follows stringent guidelines. Claims are only considered if financial stability.
NPA reporting is done within the prescribed timelines, the
guarantee fee is up to date, and legal proceedings for re- Conclusion
covery have been initiated. Additionally, the required secu- The Mutual Credit Guarantee Scheme for MSMEs (MCGS-
rity must have been established prior to the account turn- MSME) is a groundbreaking initiative that aims to transform
ing NPA, and all other scheme conditions must be met. Sim- the MSME lending landscape in India. By providing govern-
ply issuing a recall notice is not considered a valid initiation ment-backed guarantee cover, the scheme lowers the risk
of legal action. Lenders must formally file cases in Lok for financial institutions, enabling them to lend larger
Adalat, Civil Court, DRT, or take action under SARFAESI Act amounts with confidence. For MSMEs, this means easier
or NCLT to qualify for guarantee invocation. These steps access to credit, lower costs, and greater opportunities for
ensure a robust and accountable claims process, protecting expansion.
both MSMEs and financial institutions.
If implemented effectively, the scheme will not only boost
The scheme also sets a cap on claim payouts, ensuring struc- MSME financing but also contribute to economic growth,
tured financial discipline. The Trust shall pay 75% of the claim job creation, and industrial modernization in India. As lend-
amount within 30 days of a valid claim being filed by the ers and borrowers adapt to this new framework, MCGS-
MLI, provided all necessary documents are in place. The MSME could emerge as a key driver in making Indian MSMEs
remaining 25% will be disbursed only after recovery pro- globally competitive.
ceedings are concluded or when the decree becomes time-
barred. Source:
Operational Guidelines on Mutual Credit Guarantee Scheme
Additionally, One Time Settlement (OTS) under the scheme for MSMEs issued by NCGTC

Mobile Phone Exports Cross Rs 2 Lakh Crore in FY25, Led by

iPhone Shipments

India's mobile phone exports exceeded Rs 2 lakh crore in FY25, a 54% surge over the previous year, driven primarily
by Apple's iPhone shipments, Union Minister Ashwini Vaishnaw announced.
"Smartphones are now among the top exported goods out of India," Vaishnaw said, adding that Apple's iPhones
accounted for Rs 1.5 lakh crore of the total exports. Other major exporters include Samsung and Motorola, while
Chinese brands such as Vivo, Oppo, and Xiaomi have yet to scale their exports.
Vaishnaw also noted that electronics manufacturing has increased more than fivefold over the past decade, while
electronics exports have grown sixfold. He further unveiled the rollout of the 'Component Scheme' guidelines, prom-
ising incentives worth Rs 22,919 crore to boost electronics manufacturing.

"We achieved value addition of about 20% and now aim to double this over the next five years," Vaishnaw added.
The scheme is expected to generate direct employment for about 1 lakh people.

BANKING FINANCE | MAY | 2025 | 25