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Government extends microfinance guarantee scheme
NDTV Profit··10 Jun
The government extended the Credit Guarantee Scheme for Microfinance Institutions 2.0 until August 31, 2026 or until guarantees worth Rs 20,000 crore are issued, whichever comes first. The scheme supports lending by banks and financial institutions to NBFC-MFIs for onward lending to small borrowers.
Prism
What It Means For You
- Small borrowers may benefit if the guarantee scheme helps MFIs access cheaper and more reliable funding.
- Interest caps and on-lending rules are important because credit expansion should not become high-cost debt for households.
- For lenders, government risk sharing can make microfinance loans more attractive during uncertain credit cycles.
What's Happening
- CGSMFI-2.0 has been extended until August 31, 2026 or Rs 20,000 crore in guarantee issuance.
- The loan limit for large MFIs has been raised from Rs 300 crore to Rs 1,000 crore under an AUM ceiling.
- The scheme provides guarantee cover through the National Credit Guarantee Trustee Company.
Microfinance Credit Flow
- Microfinance institutions lend to small borrowers who may not have easy access to formal banking credit.
- Guarantee schemes reduce lender risk, but they need strong borrower protection and repayment monitoring.
- The success of the scheme will depend on whether lower funding costs reach end customers.
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