Indian government may drop bank guarantees freeing trillions for MSMEs
The Indian government is considering dropping the rule that makes MSMEs put up performance bank guarantees (basically, locking away 3-10% of a project's value as security) for government contracts over ₹10 lakh.
If this goes through, it could free up working capital totaling trillions of rupees for enterprises, making it easier for them to manage money and take on new projects.
India SME Forum backs dropping guarantees
This move could help over 74 million MSMEs, businesses that power more than 30% of India's economy and provide jobs to over 320 million people.
Industry groups like the India SME Forum are backing the idea, saying these guarantees are tough on companies with tight budgets.
With MSMEs making up half of central government purchases in FY26, removing this hurdle could give a big boost to growth and innovation across the sector.