Credit Guarantee Scheme for Micro Finance Institutions 2.0
- 16 Jun 2026
In News:
The Government of India has extended the Credit Guarantee Scheme for Micro Finance Institutions (CGSMFI-2.0) till 31 August 2026 or until guarantees worth ?20,000 crore are issued, whichever is earlier. It has also increased the maximum loan limit for large NBFC-MFIs/MFIs from ?300 crore to ?1,000 crore (subject to 20% of AUM). As of now, ?770 crore of loans have been sanctioned under the scheme.
About CGSMFI-2.0
Launched in March 2026, CGSMFI-2.0 is a government-backed credit guarantee scheme that provides guarantee coverage to Member Lending Institutions (MLIs) for loans extended to NBFC-MFIs and other eligible MFIs. These institutions, in turn, provide microcredit to eligible borrowers as per the RBI's microfinance norms. The scheme is implemented through the National Credit Guarantee Trustee Company Ltd. (NCGTC) using an automatic approval mechanism, reducing the credit risk for lenders and encouraging greater flow of institutional finance to the microfinance sector.
Key Features
- Extended till 31 August 2026 or guarantee issuance of ?20,000 crore, whichever is earlier.
- Funds can be used only for incremental lending to eligible microfinance borrowers.
- Loans must be disbursed within three months and have a maximum tenure of three years, including a one-year moratorium.
- To ensure balanced credit distribution, MLIs must allocate at least 5% of total loans to small MFIs and 10% to medium MFIs.
Differential Guarantee Coverage
|
Category |
AUM |
Guarantee Coverage |
|
Small MFI |
Less than ?500 crore |
80% |
|
Medium MFI |
?500 crore to < ?2,000 crore |
75% |
|
Large MFI |
?2,000 crore and above |
70% |
The earlier scheme provided a uniform 75% guarantee, whereas CGSMFI-2.0 offers higher protection to smaller institutions to improve credit access in underserved areas.
Loan Limits
|
Category |
Maximum Loan Limit |
|
Small MFI |
?100 crore |
|
Medium MFI |
?200 crore |
|
Large MFI |
?1,000 crore (revised from ?300 crore), subject to 20% of AUM |
Microfinance Institutions (MFIs)
MFIs are financial intermediaries that provide small, collateral-free loans and financial services to low-income households, particularly in rural and semi-urban areas, thereby promoting financial inclusion, livelihood generation, and women’s empowerment. They function primarily as NBFC-MFIs or cooperative/NGO-led institutions.
Key features include:
- Target beneficiaries: Low-income households, women, small entrepreneurs, and informal workers.
- Loan size: Generally ?5,000–?1,00,000.
- Delivery models: Joint Liability Groups (JLGs) and Self-Help Groups (SHGs).
- Regulation:RBI regulates NBFC-MFIs, while NABARD supports and refinances the SHG-Bank Linkage Programme.