The Government has revised the Mutual Credit Guarantee Scheme (MCGS) to strengthen support for Micro, Small and Medium Enterprises (MSME) manufacturers and exporters in line with Budget 2025-26. The modifications were announced by the Ministry of Finance and are intended to expand coverage, reduce the compliance burden and provide targeted incentives for exporter MSMEs. The National Credit Guarantee Trustee Company Limited (NCGTC) will provide the guarantee cover to Member Lending Institutions under the revised framework. The changes aim to improve access to finance for capital investment in equipment and machinery.

Under the revised norms the scheme provides 60 per cent guarantee coverage by NCGTC to Member Lending Institutions for credit facilities up to Rs one bn sanctioned to eligible MSME beneficiaries under MCGS-MSME for purchase of equipment and machinery. 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 been widened to include service sector MSMEs and the minimum project cost requirement towards machinery and equipment has been reduced to 60 per cent from the earlier 75 per cent. These adjustments are designed to lower the effective cost of borrowing and encourage investment in productive capacity.

The Ministry expects that the revised provisions will facilitate increased availability of credit for purchase of plant and machinery and equipment by MSMEs including exporter MSMEs and thereby support manufacturing and export growth. Member Lending Institutions are expected to see improved risk sharing due to enhanced guarantee cover and refundable contribution mechanisms. The policy changes also seek to streamline processes to reduce administrative delays.

Stakeholders in the manufacturing and export ecosystem are likely to benefit from easier access to equipment finance and clearer incentive signals under the altered scheme. The Government views the revisions as a step to bolster competitiveness and augment job creation in the MSME sector. Implementation details and operational guidelines will be provided to lenders to ensure smooth rollout.