The Government of India has extended the validity of the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) until August 31, 2026, or until guarantees covering ₹20,000 crore are issued, whichever comes first. The decision is aimed at improving the use of the scheme and increasing the flow of credit to the microfinance sector.
The government has also increased the maximum loan amount available to large Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs) and Microfinance Institutions (MFIs). The cap has been raised from ₹300 crore to ₹1,000 crore, subject to the existing overall limit of 20% of Assets under Management (AUM).
The CGSMFI-2.0 scheme was introduced to encourage banks and financial institutions to continue lending to microfinance institutions by reducing their credit risk through government-backed guarantees. The extension and revised limits are expected to strengthen the availability of funds for small borrowers who depend on microfinance loans.
According to the government, loans amounting to ₹770 crore have already been sanctioned under the scheme since its launch earlier this year.
Key Highlights
- The validity of CGSMFI-2.0 has been extended until August 31, 2026, or until guarantees worth ₹20,000 crore are issued.
- The maximum loan amount for large NBFC-MFIs and MFIs has been increased from ₹300 crore to ₹1,000 crore.
- The revised limit remains subject to the overall ceiling of 20% of Assets under Management (AUM).
- Loans worth ₹770 crore have been sanctioned under the scheme so far.
- The scheme provides guaranteed support to banks and financial institutions lending to NBFC-MFIs and MFIs.
- The move is expected to improve utilisation of the scheme and support greater credit flow to the microfinance sector.
Government Extends Scheme to Support Credit Flow
The Central Government approved the extension of the Credit Guarantee Scheme for Microfinance Institutions-2.0 to ensure continued support for lending to the microfinance sector.
The scheme will now remain operational until August 31, 2026, or until guarantees amounting to ₹20,000 crore are issued under the programme, whichever occurs earlier.
In addition, the government approved an increase in the maximum loan amount that large NBFC-MFIs and MFIs can access under the scheme. The cap has been raised to ₹1,000 crore from the earlier limit of ₹300 crore. However, the revised limit remains within the overall ceiling of 20% of the institution’s Assets under Management.
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Purpose and Progress of CGSMFI-2.0
The CGSMFI-2.0 scheme was introduced by the Central Government on March 20, 2026. It aims to provide guarantee cover to banks and financial institutions through the National Credit Guarantee Trustee Company Limited (NCGTC).
The guarantee protects lenders against expected losses on financial assistance extended to NBFC-MFIs and MFIs, which then on-lend these funds to small borrowers. As of June 10, 2026, loans totalling ₹770 crore have been sanctioned under the scheme.
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Key Features of the Scheme
Eligible borrowers under the scheme include both existing and new small borrowers who fall within the regulatory definition of microfinance prescribed by the Reserve Bank of India (RBI) from time to time.
The guarantee coverage varies according to the size of the institution. It covers 80% of the amount in default for small NBFC-MFIs and MFIs, 75% for medium-sized institutions, and 70% for large institutions.
The guarantee fee is fixed at 0.50% per annum. It is charged on the sanctioned amount during the first year and on the outstanding amount in subsequent years.
Interest rates on loans provided by Member Lending Institutions (MLIs) to NBFC-MFIs and MFIs are capped at the External Benchmark Lending Rate (EBLR) or Marginal Cost of Funds-Based Lending Rate (MCLR) plus 2% per annum.
For loans extended by MFIs and NBFC-MFIs to small borrowers, the interest rate must be at least 1% lower than the institution’s average lending rate during the previous six months.
Source: Ministry of Finance
