Govt. extends credit guarantee scheme for microfinance institutions

NEW DELHI — The Central Government has extended the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) up to August 31, 2026, or till guarantees for an amount of INR 20,000 crore are issued, whichever is earlier.

The Government has also approved an increase in the maximum loan amount cap for large-sized NBFC-MFIs/MFIs from INR 300 crore to INR 1,000 crore under the overall ceiling of 20 per cent of Assets Under Management (AUM), according to a statement issued by the Finance Ministry on Wednesday.

The extension of the scheme's validity and the increase in the maximum loan amount cap for large-sized NBFC-MFIs/MFIs are expected to result in better utilisation of the scheme and facilitate increased credit flow to the microfinance institutions sector.

Also Read: Fuel, LPG supplies remain normal across Delhi — BPCL

The Central Government introduced the CGSMFI-2.0 scheme on March 20, 2026. The scheme aims to provide guarantee cover to banks and financial institutions through the National Credit Guarantee Trustee Company Limited (NCGTC) against expected losses on financial assistance extended by them to Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs) and MFIs for on-lending to small borrowers.

As of date, loans totalling INR 770 crore have been sanctioned under the scheme.

Those eligible for loans under the scheme include existing and new small borrowers within the regulatory definition of microfinance as prescribed by the RBI from time to time.

The guarantee coverage extends to 80 per cent of the amount in default for small NBFC-MFIs/MFIs, 75 per cent for medium NBFC-MFIs/MFIs and 70 per cent for large NBFC-MFIs/MFIs.

The guarantee fee under the scheme is 0.50 per cent per annum on the sanctioned amount for the first year and on the outstanding amount thereafter.

The interest rate has been capped at EBLR or MCLR plus 2 per cent per annum on loans by MLIs to NBFC-MFIs or MFIs.