New Delhi, March 21 The Centre, on Saturday, introduced major modifications to the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME), aimed at improving credit access and supporting growth in the micro, small and medium enterprises sector, the Ministry of Finance said.
Launched in January 2025, the scheme provides 60 per cent guarantee coverage by the National Credit Guarantee Trustee Company Limited (NCGTC) to member lending institutions for loans of up to Rs 100 crore extended to eligible MSMEs for the purchase of equipment and machinery.
Based on feedback from MSMEs and lending institutions, the Union government has introduced several changes to make the scheme more flexible and inclusive.
Under the revised norms, the five per cent upfront contribution has been made refundable, with one per cent returned each year from the fourth year onwards, subject to satisfactory loan performance.
The eligibility criteria have also been expanded to include service sector MSMEs, while the minimum project cost requirement towards machinery and equipment has been reduced to 60 per cent from the earlier 75 per cent.
Moreover, the guarantee tenure under the scheme has been capped at 10 years.
Meanwhile, special provisions have also been introduced for exporters.
Eligible units must be profitable and should have exported at least 25 per cent of their turnover in each of the previous three financial years, along with meeting export realisation conditions, the Union government said.
For such exporters, the guaranteed loan amount has been fixed at Rs 20 crore, with an upfront contribution of two per cent of the loan amount (capped at Rs 40 lakh).
This contribution will be refunded at the rate of one per cent each in the fourth and fifth years of the guarantee period, the Finance Ministry said.
The Union government also said that guarantee coverage for exporters has been set at 75 per cent of the default amount.
While no guarantee fee will be charged in the first year, a fee of 0.5 per cent of the outstanding loan will be applicable annually thereafter.
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