In order to boost Micro, Small and Medium Enterprises (MSME) Manufacturers and Exporters as proposed in the Budget 2025-26, the central government has tweaked the Mutual Credit Guarantee Scheme (MCGS).

The scheme aims to improve access to institutional credit for MSME manufacturers and exporters, enabling them to invest in modern machinery and technology, and consequently, jump-start manufacturing capabilities, exports and jobs.

What is the Mutual Credit Guarantee Scheme?

MCGS was notified in January this year to promote credit to MSMEs by providing a 60 percent government guarantee cover through the National Credit Guarantee Trustee Company Limited (NCGTC) for credit facility up to 100 crore rupees to lending institutions on MCGS-MSME account for the purchase of machinery and equipment by eligible Micro, Small and Medium-scale Enterprises.

Amendments

1. Service sector MSMEs too can access scheme

Mutual Credit Guarantee Scheme has now been extended to cover Micro, Small, Medium-scale Service Enterprises as well. Earlier, MCGS-MSME was only available for manufacturing units. This amendment aims to catalyse the adoption of modern technology by service sector MSMEs in diverse fields like logistics, healthcare, hospitality and more.

2. Reduced equipment cost

The new version of MCGS has reduced equipment cost requirement to give a much-needed fillip to MSMEs which may have other expenditures as well apart from equipment.

3. Enhanced guarantee period

An amendment has been introduced to extend the guarantee period up to 10 years. This will promote long-term borrowing by lending institutions as well as by MSMEs manufacturing units. This is because usually, when manufacturing units borrow money, they take a long time to pay back the entire amount.

A positive step for financial inclusion

Experts feel that MCGS-MSME is a positive step in the right direction as it will facilitate credit access for first-time MSME lenders as also for first-generation entrepreneurs who generally find it difficult to get bank loans.

The reduced eligibility criteria as also the amendment to include service sector MSMEs will give a much-needed push to such enterprises to expand their business activities.

The Road Ahead

While the amended Mutual Credit Guarantee Scheme is an umbrella policy document, it will be available for the MSMEs to utilise this opportunity by approaching their nearest banks and lenders to see what benefits are available to them under this scheme.

Given the importance of MSMEs in terms of employment generation and also their contribution to the country’s exports, MCGS-MSME can play a big role in enabling them to gear up their manufacturing capabilities so that they can meet the rising domestic as well as global demand.