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.