RAS question
What is the annual guarantee fee in the sanction year under MCGS-MSME?
Correct answer: (A) Nil (Zero).
Under MCGS-MSME, the annual guarantee fee on the loan is nil during the year of sanction.
Explanation
MCGS-MSME is a credit-guarantee scheme for eligible MSMEs, with guarantee coverage provided through the National Credit Guarantee Trustee Company Limited to member lending institutions for credit facilities of up to Rs 100 crore for equipment or machinery. The fee question turns on the scheme's staged annual guarantee-fee structure. In the sanction year, the borrower does not pay an annual guarantee fee: it is nil. The fee starts only after that first year. For the next three years, it is 1.5% per annum of the loan outstanding as on March 31 of the previous year. Thereafter, it falls to 1% per annum on the same outstanding-loan basis. So option A is right because the question asks specifically about the sanction year, not the later years.
Why the other options are wrong
- (B) 0.5% per annum is not part of the stated annual guarantee-fee schedule for MCGS-MSME.
- (C) 1% per annum applies only after the next three years following the sanction year, not in the sanction year itself.
- (D) 1.5% per annum applies during the next three years after the sanction year, so it is not the fee in the year of sanction.
Concept
This tests the Indian Economy syllabus area on MSME credit-support schemes and their operational terms. RAS often asks such details because scheme design, eligibility and fee structures affect how public credit support actually reaches firms.