Govt approves Rs 20,000 cr credit guarantee scheme for fund flow to MFIs
Business 21 Mar, 2026

Govt approves Rs 20,000 cr credit guarantee scheme for fund flow to MFIs

Business To Business, New Delhi, 21 March 2026: The Government has cleared a ₹20,000 crore credit guarantee scheme called Credit Guarantee Scheme for Microfinance Institutions 2.0 (CGSMFI-2.0)
It will be implemented through
National Credit Guarantee Trustee Company (NCGTC)

  • Provides a credit guarantee to lenders (like banks and NBFCs)
  • Covers loans given to:
    • Microfinance institutions (MFIs)
    • NBFC-MFIs
  • Applies to loans disbursed until June-end (limited period)
In simple terms:
If MFIs fail to repay, the government absorbs part of the risk, encouraging lenders to keep funding them.
MFIs have been under stress due to:
  • Rising NPAs (Non-Performing Assets)
  • Reduced willingness of lenders to extend fresh loans
  • Liquidity challenges affecting their operations
  • MFIs: Easier access to funding
  • Banks/NBFCs: Lower risk in lending
  • Borrowers: Continued access to small loans (often low-income households, small businesses)
  • Supports people at the “bottom of the pyramid”
  • Helps maintain financial inclusion
  • Prevents disruption in rural and small-scale lending ecosystems
The scheme is a temporary safety net to revive lending to MFIs during a difficult phase, ensuring that credit continues to flow to the most financially vulnerable segments of society.

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