NEW DELHI: The Center on Saturday announced key revisions to the Mutual Credit Guarantee Scheme for MSMEs (MCGS–MSME), expanding its scope beyond manufacturing and making it easier for firms to access collateral-free credit.
As part of the changes, service-sector micro, small and medium enterprises (MSMEs) can now participate in the scheme, and the minimum machinery or equipment cost requirement has been lowered to 60% from 75% of the total project cost, according to a finance ministry statement.
Loans of up to ₹100 crore will continue to receive 60% guarantee coverage 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 guarantee tenure is capped at 10 years, it added.
Exporter-focused provisions have also been introduced. Profitable MSMEs with at least 25% export turnover in the last three financial years can borrow up to ₹20 crore with 75% guarantee coverage. Their upfront contribution is set at 2% (capped at ₹40 lakh), with partial refunds in later years, while guarantee fees are waived in the first year and fixed at 0.50% annually thereafter.
“The modifications in MCGS-MSME scheme are expected…give a major boost to manufacturing and export sector in India,” the finance ministry said in the statement.
Vinod Kumar, president of the India SME Forum, called the changes a game-changer for collateral-free credit access. He said the reforms, covering refundable contributions, lower entry thresholds, and export incentives, directly address long-standing industry concerns and will help MSMEs scale amid India’s FTA-driven global push.
MSMEs contribute roughly 30% to India’s GDP, more than 45% of exports, and employ over 350 million workers. The finance ministry said the modifications are expected to boost manufacturing, exports, and job creation, helping achieve the vision of “Viksit Bharat 2047.”
