• Cabinet extends CGFMU for five years until March 31, 2031.
• Rs.5,000 crore corpus to support the credit guarantee framework.
• Scheme expected to facilitate Rs.12.6 lakh crore in PMMY loans.
• Annual guarantee fee for eligible PMMY loans reduced from 1% to 0.75%.

GG News Bureau
New Delhi, 11th Nov: The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved a five-year extension of the Credit Guarantee Fund for Micro Units (CGFMU) until March 31, 2031, to strengthen collateral-free lending and support micro entrepreneurs across the country.

The continuation of the scheme is expected to facilitate loans amounting to Rs.12.6 lakh crore under the Pradhan Mantri Mudra Yojana (PMMY) over the next five years. The approved corpus stands at Rs.5,000 crore.

Launched in January 2016, CGFMU provides credit guarantee coverage to lending institutions through the National Credit Guarantee Trustee Company Limited (NCGTC), protecting them against default risks on eligible loans.

According to the government, as of September 2026, lending institutions had sanctioned more than 60.36 crore loans amounting to Rs.43.34 lakh crore since the launch of PMMY. The credit guarantee mechanism has played a key role in expanding access to institutional finance for small businesses and aspiring entrepreneurs.

Under the scheme, guarantee coverage will be available for eligible micro-enterprise loans of up to Rs.20 lakh under PMMY. It will also cover overdrafts of up to Rs.10,000 extended by banks through Pradhan Mantri Jan Dhan Yojana accounts and loans to Self Help Groups with portfolios ranging from Rs.10 lakh to Rs.20 lakh.

The government has also reduced the annual guarantee fee for eligible PMMY loans from 1% to 0.75%. The fee structure for Self Help Groups will remain unchanged at 0.25% for the first year and 0.50% in subsequent years.

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

The government said the extension would encourage lending institutions to extend credit to entrepreneurs who may otherwise face difficulties accessing formal banking services. It is also expected to support new businesses, strengthen existing micro enterprises and promote self-employment.