Credit Guarantee Fund for Micro Units Extended to 2031

The Union Cabinet approved the continuation of the Credit Guarantee Fund for Micro Units (CGFMU) for five years on November 11, 2026. The extension runs until March 31, 2031, with an approved corpus of ₹5,000 crore.

Guarantee coverage and fees

The CGFMU provides guarantee cover to lending institutions against defaults on eligible loans, including through the National Credit Guarantee Trustee Company Limited. It supports collateral-free loans of up to ₹20 lakh under the Pradhan Mantri Mudra Yojana (PMMY), overdrafts of up to ₹10,000 under the Pradhan Mantri Jan Dhan Yojana, and Self Help Group loans of ₹10 lakh to ₹20 lakh. The annual guarantee fee for lending institutions has been reduced from 1% to 0.75%. For Self Help Group loans, the fee remains 0.25% in the first year and 0.50% in subsequent years.

PMMY lending under the extension

The extension covers PMMY loans during the 16th Finance Commission cycle, from financial years 2026–27 to 2030–31, and is projected to facilitate ₹12.6 lakh crore in loans over five years. As of September 2026, lending institutions had sanctioned more than 60.36 crore PMMY loans worth ₹43.34 lakh crore since the scheme’s launch. The CGFMU was originally launched in January 2016.

Important Facts for Exams

• PMMY loan bands: Pradhan Mantri Mudra Yojana classifies non-agricultural loans as Shishu (up to ₹50,000), Kishore (₹50,000–₹5 lakh) and Tarun (₹5–10 lakh).
• SHG savings-to-credit pathway: Indian self-help groups pool members’ savings; well-managed groups may then obtain bank loans for small businesses or farming.
• MUDRA’s lending channel: MUDRA is not generally the retail lender under PMMY; loans are originated by banks, regional rural banks, small finance banks, NBFCs and microfinance institutions.
• Jan Dhan overdraft eligibility: A PMJDY overdraft is generally available after six months of satisfactory account operation, subject to eligibility; one account per household is prioritised, preferably held by a woman.