Indian Economy News

Government modifies Mutual Credit Guarantee Scheme to Support MSME Manufacturers and Exporters in line with Budget 2025-26

The Government of India has approved important changes to the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) in line with the Union Budget 2025-26, to facilitate easier access to credit facilities by micro, small, and medium-sized enterprises, as well as enhance manufacturing and export potential. The Mutual Credit Guarantee Scheme for MSMEs offers a guaranteed cover of up to 60% by the National Credit Guarantee Trustee Company Limited (NCGTC) on loans up to US$ 10.82 million (Rs. 100 crore) availed by Member Lending Institutions to purchase plant and machinery. The new policy has included service sector MSMEs in the eligibility criteria, reduced compliance, and enhanced ease of financing. The minimum project cost requirement has been reduced to 60% (from 75%) in terms of machinery, while the guaranteed tenure has been set at 10 years, making the scheme more accessible and industry-friendly.

The modified scheme has also provided incentives to exporter MSMEs to boost global competitiveness. Exporters with an export turnover of at least 25% over the last three years are now able to avail loans up to US$ 2.16 million (Rs. 20 crore) with 75% guarantee cover in case of default. The upfront cost has been reduced to 2%, capped at US$ 48,700 (Rs. 40 lakh), and partial refunds depending on loan performance, while the first-year guarantee fee has been waived. The move is expected to boost credit flows to MSMEs to fund capital investment, thus helping them to upgrade technology, scale up production, and boost exports. As MSMEs contribute to about 30% of India's GDP and over 45% to exports, this revised scheme is expected to play a major role in taking industrial growth to the next level to achieve the vision of 'Viksit Bharat 2047'.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.