NEW DELHI: The Center on Saturday announced key revisions to the MSME Mutual Credit Guarantee Scheme (MCGS-MSME) scheme, expanding its scope beyond manufacturing and making it easier for firms to access collateral-free credit.
As part of the changes, micro, small and medium enterprises (MSMEs) in the service sector can now join the scheme and the minimum cost requirement for machinery or equipment has been reduced to 60% from 75% of the total project cost, according to a finance ministry statement.
Loans up to ₹100 crore will continue to receive 60% guarantee cover from the National Credit Guarantee Trustee Company Limited (NCGTC), while the previously non-refundable 5% upfront contribution will now be partially refundable starting from the fourth year. The warranty period is limited to 10 years, he added.
Provisions aimed at exporters have also been introduced. Profitable SMEs with at least 25% export turnover in the last three financial years can borrow up to ₹20 crore with 75% warranty coverage. Their initial contribution is set at 2% (with a maximum limit of ₹40 lakh), with partial refunds in later years, while the guarantee charges are waived off in the first year and are capped at 0.50% p.a. thereafter.
“The adjustments in the MCGS-MSME scheme… are expected to provide a major boost to the manufacturing and export sectors in India,” the finance ministry said in a statement.
Vinod Kumar, president of India Small and Medium Enterprises Forum, termed the changes as a sea change in the approach to unsecured credit. He said the reforms, which include refunds, lower entry thresholds and export incentives, directly address long-standing industry concerns and will help SMEs expand amid India’s global push driven by a free trade agreement.
MSMEs contribute roughly 30% to India’s GDP, more than 45% of exports and employ over 350 million workers. The finance ministry said the adjustments are expected to boost manufacturing, exports and job creation and help achieve the ‘Viksit Bharat 2047’ vision.
