In a significant move aimed at strengthening India’s export ecosystem, the Centre is gearing up to launch a new credit guarantee scheme tailored specifically for export-oriented Micro, Small and Medium Enterprises (MSMEs). The scheme, expected to be operational by September 2025, is currently in the drafting stage and is slated to be finalised within a month.
According to senior government officials, the scheme will offer collateral-free term loans of up to ₹20 crore per borrower. It is designed to support working capital needs and expansion plans of MSME exporters through bank-funded term loans. This marks the first time such a dedicated credit guarantee mechanism will be made available exclusively to export-oriented MSMEs.
Under the proposed structure, the scheme will provide a credit guarantee cover of up to 95% for micro and small enterprises, and up to 75% for medium enterprises. The guarantee fee is expected to be around 1.5% for borrowers.
The scheme is intended to run for six years, aligning with the 16th Finance Commission award cycle, and will be managed by the National Credit Guarantee Trustee Company Limited (NCGTC).
At present, export-oriented MSMEs face challenges in accessing guaranteed loans for diverse needs. While the Export Credit Guarantee Corporation (ECGC) offers risk cover for export orders via packing credit and post-shipment finance, other facilities such as cash credit, overdrafts, and term loans for expansion or modernisation remain outside its purview. The upcoming scheme aims to bridge this gap.
Following Finance Minister Nirmala Sitharaman’s announcement of a credit guarantee scheme for well-performing MSME exporters, the Department of Financial Services has held multiple consultations with stakeholders, including banks and industry representatives.
Interest rates for loans under the scheme will be governed by lenders’ board-approved policies and existing regulatory norms, though they are anticipated to be competitively priced due to the reduced credit risk.
Initially, the scheme will focus on export-oriented units (EOUs), with plans to later include MSMEs engaged in import substitution. This expansion is expected once the initial rollout stabilises.
India’s MSME sector, comprising over 1 crore registered units, employs approximately 7.5 crore people and contributes 36% to the country’s manufacturing output and 45% to exports. A robust credit support mechanism is seen as crucial to furthering India’s ambition of becoming a global manufacturing hub.
The new credit guarantee initiative is expected to enhance credit flow to deserving exporters, improve foreign exchange earnings, and provide a much-needed push to MSME-led growth.
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