New interest subvention and collateral guarantee schemes to ease credit access and reduce export costs for small businesses.
The Government of India has taken a strong step toward strengthening India’s Micro, Small, and Medium Enterprises (MSME) exports with the launch of two key interventions under the Export Promotion Mission. These new initiatives are introduced under the NIRYAT PROTSAHAN sub-scheme, focusing on easing trade finance challenges and reducing export costs for MSMEs, which play a pivotal role in India’s export ecosystem.
The move is part of the government’s commitment to achieving sustained, export-led growth while supporting MSMEs to integrate more effectively into global value chains. The Union Cabinet has already approved the Export Promotion Mission with a total outlay of Rs. 25,060 crore (US$ 28.16 billion) for the period FY26 to FY31.
1. Interest Subvention Scheme for Export Credit
The first major intervention under the NIRYAT PROTSAHAN sub-scheme is the introduction of an interest subvention on pre- and post-shipment rupee export credit. This step is designed to lower the cost of credit for MSME exporters and help ease their working capital burden.
Under this initiative, the government will provide a base interest subvention of 2.75% on export credit extended by eligible lending institutions. This financial support aims to make export financing more affordable, enabling MSMEs to compete more effectively in international markets.
In the long run, the scheme also plans to add additional incentives for exports to underrepresented or emerging markets, which will become operational once the system achieves full readiness. This approach aligns with India’s strategy to diversify its export destinations and reduce dependence on traditional markets.
The benefits of the scheme will apply to exports falling under a notified positive list of tariff lines, which collectively represent nearly 75% of India’s total tariff lines. Moreover, the scheme will include a reasonable exporter-wise annual cap of Rs. 50 lakh (around US$ 56,180) per Importer-Exporter Code (IEC) for FY26.
This means eligible MSME exporters will receive direct financial relief through lower interest costs, enabling them to use their resources more efficiently for production, innovation, and market expansion.
2. Collateral-Free Credit Guarantee Support
The second major intervention addresses one of the most persistent challenges faced by MSME exporters—lack of collateral for bank financing. Many small and medium businesses struggle to access sufficient funds to expand their export operations, despite having viable business models and purchase orders.
To solve this issue, the government has introduced a Collateral Guaranteed Support for Export Credit, implemented in association with the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). This new initiative will provide MSME exporters with access to collateral-free trade finance under government-backed credit guarantees.
Under the scheme:
- Micro and Small exporters will receive up to 85% credit guarantee coverage.
- Medium exporters will be eligible for up to 65% coverage.
- The maximum guaranteed exposure will be Rs. 10 crore (about US$ 1.12 million) per exporter per year.
This strong credit support mechanism is expected to encourage financial institutions to extend more export credit to MSMEs without requiring traditional collateral. It will especially benefit first-generation entrepreneurs and emerging exporters who often face challenges in meeting stringent collateral requirements imposed by banks.
Both of these interventions—the interest subvention and the collateral guarantee scheme—will be implemented initially on a pilot basis, allowing the authorities to monitor progress, assess outcomes, and make necessary refinements for a broader rollout.
Strengthening MSME Exports and Global Competitiveness
India’s MSME sector, which accounts for nearly 45% of the country’s total exports, stands to gain immensely from these reforms. By reducing the cost of credit and improving access to financial support, the government aims to empower small exporters to enhance product quality, invest in technology, and boost production capabilities.
These measures will also help strengthen India’s export competitiveness globally, allowing MSME exporters to take advantage of growing opportunities in sectors such as manufacturing, engineering goods, textiles, food processing, and sustainable products.
Moreover, the emphasis on exports to underrepresented emerging markets complements India’s broader trade policy objective of exploring new global territories and reducing dependence on conventional regions like Europe and North America. This diversification strategy is expected to build more resilience in the export ecosystem and reduce vulnerability to market-specific shocks.
Boost to “Make in India” and “Atmanirbhar Bharat” Initiatives
The interventions under the Export Promotion Mission are firmly aligned with Prime Minister Narendra Modi’s “Make in India” and “Atmanirbhar Bharat” visions, which focus on self-reliance, manufacturing excellence, and global competitiveness.
By enabling easier access to finance, lower borrowing costs, and improved credit support, these schemes are expected to empower thousands of small exporters to scale their businesses internationally. This will not only generate employment but also contribute significantly to India’s ambition of becoming a US$ 2 trillion export economy in the coming years.
Implementation and Monitoring
The two schemes will operate through participating banks and financial institutions, which will be responsible for extending credit and implementing the subvention benefits. The government will continuously monitor their performance and impact, using feedback from stakeholders to fine-tune operational guidelines.
The pilot implementation phase will also serve as a testing ground to ensure that the processes are transparent, efficient, and inclusive, with easy digital access for MSME exporters across the country.
Conclusion
Through these two well-designed interventions — interest subvention on export credit and collateral guarantee support — the Government of India has demonstrated its strong commitment to building a robust and globally competitive MSME export sector.
