Government recently has modified Mutual Credit Guarantee Scheme for MSMEs (MCGS- MSME) to support MSME nanufacturers and exporters in line with Budget 2025-26. These modifications expand coverage, reduce compliance burden, and provide targeted incentives for exporter MSMEs. They make loans up to ₹100 crore for purchase of Plant and Machinery/Equipment eligible for guarantee coverage
What is Mutual Credit Guarantee Scheme for MSMEs?
It is a government-backed initiative launched in January 2025 to facilitate easier access to credit for Micro, Small, and Medium Enterprises (MSMEs). It primarily provides guarantee coverage for loans used to purchase plant, machinery, and equipment, reducing the risk for lenders and the collateral burden for borrowers.
Key Features & Eligibility of MCGS- MSME Scheme
- Guarantee Coverage: 60% guarantee by the for standard loans. National Credit Guarantee Trustee Company (NCGTC)
- Loan Limit: Supports credit facilities up to ₹100 crore.
- Eligible Borrowers: MSMEs with a valid Udyam Registration Number.
Modifications in the existing “MCGS–MSME” scheme:
- Upfront Contribution: 5% Upfront contribution made refundable, 1% each from 4th year onwards, subject to satisfactory performance of loan account.
- Eligibility: Service Sector MSMEs also included in the Scheme.
- Minimum project cost towards Machinery/Equipment: Cost of equipment/ machinery reduced upto 60% of project cost (from earlier 75%).
- Guarantee Tenure: Guarantee to expire after 10 years.
Special provisions for exporters:
- Eligible exporters: Profitable units having exported at least 25% of their sales turnover in each of previous 3 financial years and satisfying certain export realisation conditions.
- Guaranteed Loan Amount: ₹20 crore.
- Upfront Contribution: 2% of loan amount (Max ₹40 Lacs); 1% each refundable in 4th and 5th year of the guarantee period.
- Guarantee Coverage: 75% of the amount in default.
- Guarantee Fee: First year: Nil; Thereafter, every year: 0.50% of loan outstanding.
Major Impact
- MSMEs contribute around 30% to the GDP and over 45% to the exports of India and give employment to more than 35 crore workers.
- Achieving the vision of “Viksit Bharat 2047” requires strong, globally competitive, and sustainable MSMEs.
- Modifications in MCGS-MSME scheme are expected to facilitate increased availability of credit for purchase of Plant and Machinery/Equipment by MSMEs, including exporter MSMEs, and give a major boost to manufacturing and export sector in India.