Cabinet Extends Credit Guarantee Fund For Micro Units By Five Years, Targets Rs 12.6 Lakh Crore In Loans

New Delhi, Nov 12 (KNN) The Union Cabinet has approved the continuation of the Credit Guarantee Fund for Micro Units (CGFMU) for five years up to March 31, 2031, with a corpus of Rs 5,000 crore to facilitate loans worth Rs 12.6 lakh crore under the Pradhan Mantri Mudra Yojana (PMMY).

The scheme provides credit guarantee coverage to lending institutions through the National Credit Guarantee Trustee Company Limited (NCGTC) against the risk of loan defaults.

Since the launch of PMMY, lending institutions have sanctioned more than 60.36 crore loans amounting to Rs 43.34 lakh crore as of September 2026. Launched in January 2016, CGFMU supports lending to micro enterprises by providing guarantee coverage to financial institutions.

Under the scheme, guarantee coverage will be available for loans of up to Rs 20 lakh to eligible micro enterprises under PMMY, overdrafts of up to Rs 10,000 under the Pradhan Mantri Jan Dhan Yojana (PMJDY), and loans to Self-Help Groups (SHGs) with portfolios ranging from Rs 10 lakh to Rs 20 lakh.

The guarantee fee for PMMY loans will be reduced from 1 Percent to 0.75 Percent per annum. For SHG loans, the existing fee structure of 0.25 Percent for the first year and 0.50 Percent in subsequent years will continue.

The scheme will cover loans extended under PMMY during the 16th Finance Commission period, from FY 2026-27 to FY 2030-31.

The extension is expected to facilitate Rs 12.6 lakh crore in loans over the next five years, supporting collateral-free credit access for micro enterprises.

(KNN Bureau)