The Government of India has extended the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) until August 2026 and raised the maximum loan limit for large NBFC-MFIs/MFIs under the scheme, according to a statement by the Ministry of Finance on Wednesday.
As per the official release, the Centre has extended the validity of CGSMFI-2.0 until August 31, 2026, or until guarantees worth Rs 20,000 crore are issued, whichever comes first. The scheme was originally launched on March 20, 2026, to provide credit guarantees to banks and financial institutions for loans extended to microfinance institutions, which in turn lend to small borrowers.
Key Enhancements Under the Scheme
The government has also approved an increase in the maximum loan amount capped for large-sized NBFC-MFIs/MFIs from Rs 300 crore to Rs 1,000 crore, subject to an overall ceiling of 20 per cent of their Assets Under Management (AUM). This move is expected to lead to better utilisation of the scheme and facilitate increased credit flow to the microfinance sector.
So far, loans worth Rs 770 crore have been sanctioned under the scheme since its launch. The extension and enhanced loan limits are aimed at boosting financial inclusion and supporting micro-enterprises.
Guarantee Coverage and Interest Rate Caps
The scheme provides a guarantee cover of 80 per cent on defaulted amounts for small MFIs/NBFC-MFIs, 75 per cent for medium-sized entities, and 70 per cent for large institutions. A guarantee fee of 0.5 per cent per annum is charged on the sanctioned amount in the first year and on the outstanding amount thereafter.
Interest rates on loans extended by member lending institutions to MFIs/NBFC-MFIs are capped at EBLR or MCLR plus 2 per cent per annum. Furthermore, these institutions are required to lend to small borrowers at rates at least 1 percentage point below their average lending rate over the previous six months.
Impact on Microfinance Sector
The extension and increased loan limits are likely to enhance the reach of microfinance institutions, enabling them to serve more small borrowers across the country. This initiative underscores the government's commitment to strengthening the microfinance ecosystem and promoting financial inclusion.
