The Indian government is preparing to roll out a new credit guarantee scheme specifically aimed at export-oriented micro, small, and medium enterprises (MSMEs). Scheduled for launch by September, the scheme will enable eligible businesses to access collateral-free term loans of up to ₹20 crore per borrower. It will offer credit coverage of up to 95% for micro and small units and 75% for medium-sized firms.
This initiative, currently in the drafting stage, is designed to address a long-standing gap in credit support for MSME exporters. While the Export Credit Guarantee Corporation (ECGC) provides risk cover for export orders, it does not cover other working capital or long-term funding needs like cash credit, overdrafts, or expansion loans. The upcoming scheme will be managed by the National Credit Guarantee Trustee Company Limited (NCGTC) and will remain operational through FY31, aligning with the 16th Finance Commission cycle.
First-of-its-kind scheme to bridge credit access gap
Unlike existing export-linked insurance facilities, this will be the first scheme to offer direct credit guarantees for export-focused MSMEs. Interest rates will be governed by lenders’ board-approved policies and regulatory guidelines, though competitive pricing is expected due to reduced risk from the government-backed guarantees. Guarantee fees for borrowers are likely to be around 1.5%.
The loan coverage will support both working capital and expansion requirements. While the initial rollout will focus exclusively on export-oriented units (EOUs), the scheme may later include MSMEs involved in import substitution as well.
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Enabling growth in a vital economic sector
India’s MSME sector comprises over one crore registered businesses, employs 7.5 crore people, and contributes 45% to national exports. The new scheme is expected to ease financing hurdles, unlock investment in manufacturing capacity, and help MSMEs scale to global markets. Officials emphasise that stabilising and growing this sector is critical to India’s positioning as a global manufacturing hub.
Consultations have already taken place between the Department of Financial Services, industry representatives, and banks following the scheme’s announcement by Finance Minister Nirmala Sitharaman. Once finalised, the framework will aim to deliver timely, risk-mitigated credit flow to some of the country’s most dynamic export contributors.