New Delhi, Aug. 18 -- The government is considering removing the requirement for Performance Bank Guarantees (PBGs) for MSMEs executing public contracts, a move aimed at easing working capital constraints and improving access to government procurement.

MSME Ministry, DPIIT Examine Proposal

The proposal is being examined by the Ministry of MSME and the Department for Promotion of Industry and Internal Trade (DPIIT), as reported by The Mint.

Under the existing system, MSMEs awarded government contracts may be required to furnish PBGs equivalent to 3-10 percent of the contract value, tying up funds that could otherwise be used for business operations.

Credit Guarantees as Alternative to PBGs

The government is exploring the use of existi...