Modi government announces new incentives for MSMEs: What has changed?
What's the story
The Indian government has announced major changes to the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME). The scheme, which was earlier limited to manufacturing, has now been expanded to include service-sector micro, small and medium enterprises (MSMEs). The Finance Ministry said the minimum machinery or equipment cost requirement has been reduced from 75% to 60% of total project costs.
Scheme benefits
Key highlights of the revised scheme
Under the revised scheme, loans up to ₹100 crore shall continue to get 60% guarantee coverage from the National Credit Guarantee Trustee Company Limited (NCGTC). The upfront contribution, which was previously non-refundable at 5%, shall now be partially refundable starting from the fourth year. The maximum tenure of guarantee under this scheme is 10 years.
Export incentives
Special provisions for exporters
The revised scheme also introduces provisions aimed at exporters. Profitable MSMEs with a minimum of 25% export turnover in the last three financial years can now borrow up to ₹20 crore with 75% guarantee coverage. The upfront contribution for these companies is set at 2%, capped at ₹40 lakh, with partial refunds in later years and guarantee fees waived off during the first year.
Economic impact
Industry welcomes the changes
The Finance Ministry believes that these changes will give a major boost to India's manufacturing and export sectors. Vinod Kumar, President of the India SME Forum, called these changes a game-changer for collateral-free credit access. He said such reforms directly address long-standing industry concerns and will help MSMEs scale amid India's FTA-driven global push.