Government Modifies MCGS-MSME Scheme

On 22^nd March 2026, the Finance Ministry announced modifications to the Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME) to enhance credit access for manufacturers and exporters.

Key Points

Expanded Coverage: The services sector has now been included, widening the scheme’s scope beyond manufacturing MSMEs.
Flexible Contribution: MSMEs can now pay the 5% upfront contribution in tranches after the fourth year, easing initial financial burden.
Revised Project Cost Norms: The share of equipment/machinery cost eligible under the scheme has been reduced to 60% of project cost (from 75%).
Operationalisation: The revised scheme has been implemented by National Credit Guarantee Trustee Company Ltd. (NCGTC) from February 24, 2026.
Loan & Guarantee Details:
- Maximum guaranteed loan: ₹20 crore
- Guarantee coverage: 75% of default amount
- Guarantee tenure: 10 years
Upfront Contribution:
- 2% of loan amount (max ₹40 lakh)
- 1% refunded in the 4th year and 1% in the 5th year
Fee Structure:
- No guarantee fee in the first year
- 0.5% annually on outstanding loan thereafter
Eligibility Criteria: Profitable MSMEs with at least 25% export turnover in each of the last 3 years and meeting export realisation norms.
Economic Significance: MSMEs contribute ~30% to India’s GDP, over 45% to exports, and employ more than 35 crore people.
Objective: To improve credit availability for machinery investment, boost manufacturing capacity, and enhance export competitiveness.