Government modifies Credit Guarantee Scheme to support MSME

The Government of India has revised the Mutual Credit Guarantee Scheme to enhance credit access for Micro, Small and Medium Enterprises (MSMEs) in line with the Union Budget 2025–26.

Under the scheme, National Credit Guarantee Trustee Company Limited provides a 60% credit guarantee to Member Lending Institutions for loans up to ₹100 crore extended to eligible MSMEs for purchasing machinery and equipment.

Objective of the Changes: The modifications aim to:

• Improve access to credit for manufacturing and export-oriented MSMEs
• Provide targeted incentives to exporters
• Reduce compliance burden for businesses

Key Reforms Introduced

• The 5% upfront contribution has now been made refundable
• 1% of the contribution will be returned annually from the fourth year onwards, subject to satisfactory loan performance
• Eligibility has been expanded to include service sector MSMEs
• The minimum project cost requirement for machinery and equipment has been reduced from 75% to 60%