New Delhi, Mar 23 (KNN) The Central Government has modified the Mutual Credit Guarantee Scheme (MCGS) for MSMEs to enhance credit access and support manufacturing and export growth, in line with the roadmap outlined in the Union Budget 2025–26.
According to the Ministry of Finance, the revised guidelines aim to make the scheme more flexible and responsive to industry needs by incorporating feedback from MSMEs and lending institutions, reported ANI.
Key Revisions for Credit Access
The changes are expected to improve access to finance for the purchase of plant and machinery, thereby strengthening capacity expansion in the sector.
A key revision includes the expansion of the scheme’s coverage to MSMEs in the services sector. The minimum requirement for investment in machinery and equipment has also been reduced to 60 percent of the total project cost from the earlier 75 percent, providing greater flexibility in structuring capital expenditure.
The government has fixed the guarantee tenure at 10 years to ensure long-term support for equipment financing. Additionally, changes have been made to upfront contribution norms, with the 5 percent contribution now made refundable.
Under the revised structure, 1 percent will be returned annually from the fourth year onwards, subject to satisfactory loan performance, easing the financial burden on borrowers.
Special Provision for MSME Export
Special provisions have been introduced for export-oriented MSMEs to boost global competitiveness. Eligible units must be profitable and have maintained exports of at least 25 percent of turnover in each of the previous three financial years.
For such entities, the guaranteed loan amount has been set at up to Rs 20 crore, with coverage extending to 75 percent of the default amount.
While the first-year guarantee fee has been waived for exporters, a fee of 0.50 percent on the outstanding loan will apply from the second year onwards.
The upfront contribution for these units has been fixed at 2 percent of the loan amount, capped at Rs 40 lakh, and will be refunded in installments during the fourth and fifth years.
The ministry stated that MSMEs contribute around 30 per cent to India’s GDP and over 45 percent to exports, while employing more than 35 crore people.
It added that the scheme modifications are expected to significantly boost credit flow for capital investment and support the growth of a globally competitive MSME sector, aligned with the vision of Viksit Bharat 2047.
(KNN Bureau)
