# Centre plans to scrap performance bank guarantees for MSME contracts 2026-08-18T01:10:43+00:00 | Governance | Indian Opinion Desk Corroboration: 1 independent outlet The Indian government is considering scrapping performance bank guarantees for MSME government contracts, two officials told Livemint. The MSME ministry is discussing the proposal with the DPIIT. The move aims to free up working capital for India's 74 million MSMEs, which account for over 30% of GDP and employ over 320 million people. Under current rules, MSMEs winning government contracts worth over Rs 10 lakh must provide a bank guarantee worth 3-10% of the project value. The government is exploring replacing this with its existing credit guarantee schemes, which offer collateral-free loans. Industry stakeholders, including the India SME Forum, have long demanded this change, saying guarantees tie up vital working capital. A report by axiTrust estimated that nearly 4.5% of India's GDP, about Rs 15 trillion, remains frozen in bank guarantees. Former RBI deputy governor R. Gandhi said the change would improve MSME liquidity and lower operating costs. The proposal is under discussion between the MSME ministry and DPIIT. ## Coverage - livemint.com This story was synthesised by AI from the source linked above. Tags: DPIIT, MSME, RBI Canonical: https://indianopinion.org/centre-plans-to-scrap-performance-bank-guarantees-for-msme-contracts/ License: Summary and commentary (c) Indian Opinion, reusable with attribution. Facts belong to the linked sources. Cite: https://indianopinion.org/centre-plans-to-scrap-performance-bank-guarantees-for-msme-contracts/#story-in-brief Review state: restored archive article, accurate at time of publication, not offered to search indexes. How this brief was made: an AI model read the report linked above and wrote this summary and analysis, which were published automatically. Published briefs are sampled every hour by an automated quality check; the editor verifies its findings and approves corrections, and corrected briefs carry a dated correction line. We do no original reporting. Methodology: https://indianopinion.org/ai-use-policy/