Govt Extends MFI-Linked Scheme To Achieve Credit Flow Of Rs 20,000 Crore

The government has extended the validity of the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) until August 31, 2026, or until guarantees worth Rs 20,000 crore are issued, whichever comes first. 

It has also approved an increase in the maximum loan limit for large sized NBFC-MFIs and MFIs from Rs 300 crore to Rs 1,000 crore under the overall ceiling of 20% of assets under management, according to an official release.

The scheme aims to strengthen credit flow to the microfinance sector by providing guarantee cover through the National Credit Guarantee Trustee Co. against expected losses on lending by banks and financial institutions to NBFC-MFIs for onward lending to small borrowers.

As of now, loans totalling Rs 770 crore have been sanctioned under the scheme, reflecting early traction since its launch on March 20, 2026.

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The extension and enhancement in loan limits are expected to improve utilisation of the scheme and support higher credit flow to the NBFC-MFI ecosystem, thereby expanding access to affordable credit for small borrowers across the country.

The government has also retained key risk sharing provisions under the scheme, including guarantee coverage of 80 percent of default amount for small MFIs, 75 percent for medium entities and 70 percent for large NBFC-MFIs, along with a guarantee fee of 0.50 percent per annum on sanctioned amounts in the first year and on outstanding thereafter.

Interest rates under the scheme remain capped at EBLR or MCLR plus 2 percent per annum, while on-lending norms ensure lower borrowing costs for end microfinance customers.

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