Govt. extends micro credit guarantee scheme for 5 years, Pg10

Key Highlights:

• The Union Cabinet has approved the extension of the Credit Guarantee Fund for Micro Units (CGFMU) for five years, until March 31, 2031.
• This extension is set to facilitate Pradhan Mantri Mudra Yojana (PMMY) loans amounting to ₹12.6 lakh crore.
• A corpus of ₹5,000 crore has been approved to support the CGFMU.
• As of September 2026, over 60.36 crore loans, totaling ₹43.34 lakh crore, have been sanctioned by lending institutions under the PM Mudra scheme since its inception.
• The CGFMU, launched in January 2016, provides credit guarantee coverage to lending institutions against default risk.

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Detailed Insights:

• The CGFMU plays a crucial role in enabling the growth of PMMY loans by encouraging financial institutions to extend credit to micro-enterprises without requiring collateral.
• It offers credit guarantee coverage to lending institutions through the National Credit Guarantee Trustee Company Limited (NCGTC).
• The Pradhan Mantri Mudra Yojana (PMMY) was launched on April 8, 2015, with the objective of providing institutional credit to non-corporate, non-farm small and micro-enterprises.
• Under PMMY, loans are categorized into Shishu, Kishore, Tarun, and Tarun Plus, with the maximum loan limit increased to ₹20 lakh in October 2024.
• The provision of collateral-free loans under PMMY has significantly contributed to fostering entrepreneurship by integrating individuals previously outside the formal banking system.
• The NCGTC is a government-owned company operating under the Department of Financial Services, Ministry of Finance, responsible for managing various credit guarantee funds.

Key Concepts Involved:

• Credit Guarantee Fund for Micro Units (CGFMU): A government-backed fund that provides credit guarantee coverage to lending institutions for collateral-free micro-loans, reducing their risk.
• Pradhan Mantri Mudra Yojana (PMMY): A flagship scheme launched by the Indian government to provide institutional credit of up to ₹20 lakh to non-corporate, non-farm micro and small enterprises.
• National Credit Guarantee Trustee Company Limited (NCGTC): A government-owned company that acts as a common trustee and administrator for various credit guarantee schemes, including CGFMU.