The Government of India has approved the extension of the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) validity until August 31, 2026, or until guarantees for an amount of ₹20,000 crore are issued, whichever occurs earlier. Additionally, the government has increased the maximum loan amount cap for Large Sized NBFC-MFIs/MFIs from ₹300 crore to ₹1,000 crore under the overall ceiling of 20% of Assets under Management (AUM).
The scheme, introduced on March 20, 2026, aims to provide guarantee cover to Banks and Financial Institutions through National Credit Guarantee Trustee Company Limited (NCGTC) against expected losses on financial assistance extended to Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs) and MFIs for on-lending to small borrowers. As of the current date, loans totaling ₹770 crore have been sanctioned under the scheme.
Key features of the scheme include eligibility for existing or new small borrowers within RBI's regulatory definition of microfinance, guarantee coverage of 80% for small, 75% for medium, and 70% for large NBFC-MFIs/MFIs, and a guarantee fee of 0.50% per annum on the sanctioned amount (first year) and outstanding amount (thereafter). Interest rates are capped at EBLR or MCLR + 2% per annum on loans by MLIs to NBFC-MFIs or MFIs, while on-lending to small borrowers must be capped at 1% below the average lending rate of the past 6 months.
The extension and increased loan limits are expected to result in better utilization of the scheme and facilitate increased credit flow to the MFI sector, supporting the broader objective of enhancing credit access for small borrowers.