Indian Government Extends Credit Guarantee Fund for Micro Units with ₹5,000 Crore Allocation
The Indian government has approved the continuation of the Credit Guarantee Fund for Micro Units, extending support until December 2031.
New Delhi, November 11 (Daily Kiran) : The Indian government has approved the extension of the Credit Guarantee Fund for Micro Units (CGFMU) with an allocation of ₹5,000 crore. This initiative will continue for the next five years, now set to run until December 31, 2031.
The scheme aims to encourage young and aspiring entrepreneurs to start and expand their businesses. According to the Cabinet, this extension is expected to facilitate loans worth ₹12.6 lakh crore over the next five years. The fund provides credit guarantee coverage to lending institutions against the risk of loan defaults through the National Credit Guarantee Trustee Company Limited (NCGTC).
Since the launch of the Pradhan Mantri Mudra Yojana (PMMY) until September 2026, lending institutions have approved over 60.36 crore loans, totaling ₹43.34 lakh crore. Initiated in January 2016, the CGFMU has been a key driver in expanding credit under the PMMY.
The fund is designed to guarantee loans of up to ₹20 lakh for eligible micro enterprises under the PMMY. It also covers overdrafts of up to ₹10,000 provided by banks under the Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts, as well as loans to self-help groups (SHGs) with portfolios ranging from ₹10 lakh to ₹20 lakh.
Additionally, the guarantee coverage for working capital limits is linked to the amount disbursed, while for term loan accounts, it corresponds to the outstanding amounts, reflecting the actual risk faced by lending institutions. This scheme will apply to all loans disbursed under the PMMY during the term of the 16th Finance Commission, spanning from the fiscal year 2026-27 to 2030-31.
