Union Cabinet approves creation of a Credit Guarantee Fund for MUDRA loans

The Union Cabinet has approved creation of a Credit Guarantee Fund (CGF) for Micro Units Development Refinance Agency (MUDRA) loans.
The CGF is expected to guarantee more than 1,00,000 crore rupees worth of loans to micro and small units in the first instance.
Features of scheme

  • Credit Guarantee Fund for MUDRA Units (CGFMU) will guarantee loans sanctioned under Pradhan Mantri Mudra Yojana (PMMY) to reduce the credit risk to Banks and other financial intermediaries who are Member Lending Institutions (MLIs).
  • National Credit Guarantee Trustee Company NCGTC Ltd  will manage  and  operate  various  credit  guarantee  funds and shall  be  the  Trustee  of  the
  • NCFTC will be a wholly-owned  company  of  Union Government  and shall be constituted  under  the  Companies  Act,  1956 (2013).
  • Under this scheme the guarantee  would  be  provided  on  portfolio  basis  to  a  maximum  extent of  50 per cent  of  Amount  in  Default  in  the


  • Cabinet also gave its nod for converting MUDRA Ltd. into MUDRA Small Industries Development Bank of India (SIDBI) Bank, a wholly owned subsidiary of SIDBI.
  • The MUDRA (SIDBI) Bank will undertake refinance operations and provide support services with focus on portal management and also data analysis etc.

In the Union Budget  speech for 2015-16, Union Finance Minister Arun Jaitley had proposed to set up MUDRA Bank and CGF with  a refinance corpus of 20,000 crore rupees and a corpus of 3,000 crore  rupees respectively. MUDRA Ltd. was set up as a corporate subsidiary of SIDBI in March 2015 prior to the launch of the Pradhan Mantri MUDRA Yojana (PMMY) in April 2015.



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