The Government of India has extended the validity of the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) up to August 31, 2026, or until guarantees worth ₹20,000 crore are issued, whichever comes first. Alongside this, it has also raised the maximum loan amount that Large Sized NBFC-MFIs and MFIs can access under the scheme, from ₹300 crore to ₹1,000 crore, within the overall ceiling of 20% of Assets under Management (AUM).
What This Extension Is Expected to Do
The extended validity, combined with the higher loan cap for large NBFC-MFIs and MFIs, is expected to help the scheme get used more fully and push more credit into the microfinance sector.
Where the Scheme Came From
The Central Government first introduced CGSMFI-2.0 on March 20, 2026. The idea behind it is straightforward: provide guarantee cover to banks and financial institutions through the National Credit Guarantee Trustee Company Limited (NCGTC), protecting them against expected losses on the financing they extend to Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs) and MFIs, which in turn lend to small borrowers. So far, loans worth ₹770 crore have been sanctioned under the scheme.
How the Scheme Works
A few key features define the scheme. Eligible borrowers are existing or new small borrowers who fall within the regulatory definition of microfinance set by the RBI from time to time. Guarantee coverage varies by size, 80% of the defaulted amount for small NBFC-MFIs/MFIs, 75% for medium ones, and 70% for large ones.
The guarantee fee is set at 0.50% per annum, calculated on the sanctioned amount in the first year and on the outstanding amount after that. As for interest rates, loans from banks and financial institutions to NBFC-MFIs or MFIs are capped at EBLR or MCLR plus 2% per annum. And when these MFIs and NBFC-MFIs lend further to small borrowers, they’re required to cap their interest rate at 1% below the average lending rate of the past six months.
Key Takeaway: The extension of the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) until 31 August 2026 or the issuance of guarantees worth ₹20,000 crore, along with the increase in the maximum eligible loan amount for Large NBFC-MFIs and MFIs from ₹300 crore to ₹1,000 crore, is aimed at expanding the flow of institutional credit to the microfinance sector.
Implemented through the National Credit Guarantee Trustee Company Limited (NCGTC), the scheme provides graded guarantee cover to banks and financial institutions lending to NBFC-MFIs and MFIs, while prescribing interest rate caps to ensure affordable credit for small borrowers. The measures are expected to strengthen financial inclusion by improving credit availability to underserved segments and enhancing the effectiveness of the Government’s microfinance support framework.
M.C.Q.
Question 1: The Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) is implemented through which of the following institutions?
- A. Small Industries Development Bank of India (SIDBI)
- B. National Bank for Agriculture and Rural Development (NABARD)
- C. National Credit Guarantee Trustee Company Limited (NCGTC)
- D. National Housing Bank (NHB)
Question 2: Under the revised CGSMFI-2.0, the maximum eligible loan amount for Large NBFC-MFIs and MFIs has been increased from ₹300 crore to:
- A. ₹500 crore
- B. ₹750 crore
- C. ₹1,000 crore
- D. ₹1,500 crore
Read More: India-Slovakia’s Strong & Comprehensive Partnership Deal
