The government on Wednesday approved the continuation of Credit Guarantee Fund for Micro Units (CGFMU) with a corpus of Rs 5,000 crore for a period of five years, up to December 31, 2031
NEW DELHI — The government on Wednesday approved the continuation of Credit Guarantee Fund for Micro Units (CGFMU) with a corpus of Rs 5,000 crore for a period of five years, up to December 31, 2031.
The scheme will act as a catalyst to young aspiring entrepreneurs to set up and grow their business.
The extension of the scheme will enable loans of Rs 12.6 lakh crore over the next five years. The scheme provides credit guarantee coverage to the lending institutions through National Credit Guarantee Trustee Company Limited (NCGTC) against default risk, according to the Union Cabinet.
As on September 2026, more than 60.36 crore loans amounting to Rs 43.34 lakh crore have been sanctioned by lending institutions since the launch of PM Mudra Scheme.
The CGFMU, which was launched in January 2016, has acted as a major catalyst in enabling the growth of PMMY loans in the country.
The purpose of the fund is to provide guarantee to lending institutions for loans extended to eligible micro enterprises under Pradhan Mantri Mudra Yojana (PMMY) up to Rs 20 lakh; overdraft of up to Rs 10,000 provided by banks under Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts; and loans granted to Self Help Group (SHG) where portfolio is between Rs.10 lakh to Rs 20 lakh.
Also, the guaranteed coverage is linked to the disbursement amount in case of working capital limits and outstanding amount for term loan accounts to reflect the actual risk exposure of lending institutions.
The scheme would be applicable to all loans extended under PMMY during the XVIth Finance Commission Cycle (FY 2026-27 to FY 2030-31).
According to an official statement, collateral free loans under Pradhan Mantri Mudra Yojana (PMMY) have created a whole new generation of entrepreneurs who previously could not avail loans from the formal banking system.