Government Eases QCO Norms & Boosts Credit Flow for MSMEs

In a significant boost to India’s Micro, Small and Medium Enterprises (MSME) sector, the Government of India has introduced a series of quality compliance relaxations, financial incentives, and improved credit access measures aimed at ensuring ease of doing business and uninterrupted domestic production.

The updates were shared by Mrs Shobha Karandlaje, Minister of State for MSME, in a written reply in the Lok Sabha on December 14, 2025.

Quality Control Orders (QCOs) Implemented with MSME-Friendly Exemptions

The Government, through the Bureau of Indian Standards (BIS) under the Department of Consumer Affairs, is implementing Quality Control Orders (QCOs) in a phased and industry-sensitive manner. The objective is to improve product quality across sectors without causing production disruptions for MSMEs.

To support compliance readiness, the following relaxations have been approved:

Key QCO Exemptions & Extensions for MSMEs

• Extended timelines:

  • Micro Enterprises: Additional 6 months for QCO compliance

  • Small Enterprises: Additional 3 months

• Import exemptions:

  • Imports by domestic manufacturers for export-oriented production are exempt.

  • Import of up to 200 units for R&D is permitted without restrictions.

• Legacy stock clearance:
  Manufacturers and importers may clear pre-implementation inventory within six months from the QCO effective date.

These measures ensure that compliance requirements do not hamper manufacturing continuity, innovation, or export workflows for MSMEs.

BIS Announces Major Financial and Technical Relaxations for MSMEs

Responding to industry feedback, BIS has implemented several reforms to simplify certification processes and reduce compliance costs.

Financial Incentives Through Reduced Marking Fees

BIS will now provide substantial concessions on annual minimum marking fees:

• 80% concession for Micro Enterprises

• 50% concession for Small Enterprises

• 20% concession for Medium Enterprises

• Additional 10% concession for MSMEs located in north-eastern states or owned by women entrepreneurs

These concessions significantly lower the cost burden for small manufacturers transitioning to certified, high-quality production.

Technical Relaxations to Ease Certification

• No mandatory in-house lab:
  MSMEs can now use BIS-recognized labs, NABL-accredited labs, cluster-based facilities, or shared testing infrastructure.

• Flexible ‘Levels of Control’:
  The earlier rigid inspection controls under the Scheme of Inspection and Testing (SIT) are now recommendatory, allowing manufacturers to define their own batch/lot controls.

• Enhanced transparency:
  BIS has published product certification guidelines and product-wise manuals on its portal to support compliance planning.

These measures are expected to accelerate certification timelines and encourage more MSMEs to adopt BIS standards without infrastructure constraints.

RBI Strengthens Credit Flow to MSMEs Through External Benchmarking

To improve monetary policy transmission and ensure fairer lending rates, the Reserve Bank of India (RBI) has advised banks to link MSME loans to external benchmarks, such as the repo rate.

Key Credit-Related Measures

• Loan reset cycles reduced to three months, enabling MSMEs to benefit faster from rate cuts.

• Banks must offer switchover options to existing MSME borrowers under mutually agreed terms.

• Introduction of Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME):

  • Provides government-backed credit guarantee for loans up to ₹100 crore for machinery and equipment procurement.

  • Encourages financial institutions including NBFCs, All-India Financial Institutions, and Scheduled Commercial Banks to lend confidently.

• Priority sector lending targets revised to enhance MSME credit flow.

• Banks cannot demand collateral for loans up to ₹10 lakh for Micro and Small Enterprises.

• Working capital assessment norms require banks to consider minimum 20% of projected annual turnover for limits up to ₹5 crore.

These steps are expected to reduce borrowing costs, improve loan accessibility, and strengthen the financial resilience of MSMEs.

A Holistic Policy Push for MSME Competitiveness

From easing QCO compliance to reducing certification costs and improving credit availability, the Government’s latest initiatives collectively aim to:

• Enhance ease of doing business

• Encourage quality manufacturing

• Promote technology adoption

• Support exports through smoother regulatory frameworks

• Enable MSMEs to scale with better financial support

For India’s 6.3 crore-strong MSME sector, these reforms present a timely opportunity to strengthen production capabilities and accelerate growth in domestic and global markets.

SMEStreet will continue to track policy updates and their industry-wide impact.
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