New Changes in MSME Credit Guarantee Scheme Announced

The Government of India has introduced important changes to the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) to further support manufacturers and exporters. The revised framework is aimed at improving credit access, reducing financial burden, and encouraging investment in machinery and equipment, in line with Budget 2025–26 priorities.

The scheme, launched in January 2025, provides credit guarantee coverage of up to 60% through the National Credit Guarantee Trustee Company (NCGTC). It supports loans of up to ₹100 crore for eligible MSMEs, primarily for the purchase of plant and machinery. Following feedback from stakeholders, the government has now refined several provisions to make the scheme more practical and inclusive.

One of the key changes includes making the upfront contribution partially refundable, which is expected to improve liquidity for businesses. The scheme has also been expanded to include service sector MSMEs, widening its overall reach. In addition, the minimum requirement for machinery and equipment investment has been reduced from 75% to 60% of the total project cost, making it easier for enterprises to qualify.

The guarantee tenure has also been extended to up to 10 years, offering longer-term support for businesses investing in expansion and modernization. These revisions are intended to reduce compliance pressure and improve the ease of doing business for MSMEs across sectors.

For exporters, the government has introduced targeted incentives under the revised scheme. Eligible export-oriented MSMEs—those with at least 25% export turnover over the past three years—can now access guaranteed loans of up to ₹20 crore. The guarantee coverage for default has been increased to 75%, along with fee relaxations in the initial year of the loan.

The government has emphasized that MSMEs play a vital role in India’s economic structure, contributing around 30% to GDP and over 45% to exports while generating large-scale employment. Strengthening this sector is seen as essential for achieving the long-term vision of Viksit Bharat 2047.

With these modifications, the scheme is expected to encourage greater investment in technology, enhance export competitiveness, and support sustainable growth of MSMEs across manufacturing and service sectors.