NEW DELHI, Aug. 18 -- The Centre aims to ease cash concerns for smaller enterprises by scrapping stiff performance bank guarantees required for government contracts, two officials aware of the discussions said. Instead, the government plans to marshal existing schemes to support the performance requirement, potentially freeing up working capital totalling trillions of rupees for enterprises that form the backbone of the Indian industry.

The Union ministry for micro, small, and medium enterprises (MSME) is discussing the proposal with the department for promotion of industry and internal trade (DPIIT), the two government officials cited earlier said on condition of anonymity. Many government contracts mandate MSMEs to furnish a performanc...