The Indian government is finalizing a streamlined credit guarantee scheme for MSMEs, expected to roll out by Q4 2025. Offering 100% cover on 20% additional loans, the initiative aims to ease liquidity stress and support units facing genuine business disruptions. Modalities are underway to ensure swift and inclusive implementation.
In a bid to strengthen the financial resilience of micro, small, and medium enterprises (MSMEs), the Centre is preparing to launch a compact version of its Covid-era credit guarantee scheme. The initiative, expected by Q4 2025, is designed to offer targeted relief to businesses navigating post-pandemic headwinds and global trade challenges.
Key Highlights:
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Notable Update on Loan Coverage: The scheme will provide a 100% government-backed guarantee on up to 20% of additional loans extended by banks to MSMEs.
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Inclusive Lending Approach: Even MSMEs classified as Special Mention Accounts (SMA) due to delayed payments or external disruptions—such as US tariff impacts—will be eligible.
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Major Takeaway on Rollout Timeline: While the framework is nearly finalized, the scheme’s launch is likely in the next quarter as operational modalities are being refined.
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Sectoral Impact: MSMEs, which account for 17% of total bank credit, have seen gross NPAs fall to 3.6% as of March 2025, indicating improved credit health and readiness for expansion.
Sources: Financial Express, Press Information Bureau, MSME Ministry Scheme Booklet