Cabinet Extends the Credit Guarantee Fund for Micro Units (CGFMU) Till 2031: Backing Collateral-Free Mudra Loans
The Union Cabinet approved the continuation of the Credit Guarantee Fund for Micro Units (CGFMU) for five years, up to March 2031, with a corpus (a dedicated pool of money) of ₹5,000 crore.
The extension is expected to support ₹12.6 lakh crore of new loans under the Pradhan Mantri Mudra Yojana (PMMY) over the next five years.
The scheme applies to all PMMY loans given during the 16th Finance Commission cycle (2026-27 to 2030-31).
The fund guarantees PMMY loans up to ₹20 lakh, overdrafts up to ₹10,000 on Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts, and Self Help Group (SHG) loans between ₹10 lakh and ₹20 lakh. The annual guarantee fee for lenders has been reduced from 1% to 0.75%.
The guarantee is run by the National Credit Guarantee Trustee Company Limited (NCGTC). CGFMU was first launched in January 2016.
As of September 2026, more than 60.36 crore loans worth ₹43.34 lakh crore had been sanctioned under PMMY since its launch.
National Credit Guarantee Trustee Company Limited (NCGTC)
The National Credit Guarantee Trustee Company Limited (NCGTC) is a government-owned company that runs India's main credit guarantee funds. A credit guarantee is a promise to a bank: "If this borrower fails to repay, we will pay you a large part of your loss." Because of this promise, banks feel safe lending to small borrowers who have no property to pledge. NCGTC manages such funds for micro loans, student loans, skill loans and other areas, and the CGFMU is one of the funds it runs.
The Cabinet's decision gives NCGTC's CGFMU a fresh ₹5,000 crore corpus for 2026-27 to 2030-31. Thanks to leverage (a small fund backing many loans, since only a part ever defaults), this corpus can support about ₹12.6 lakh crore of Mudra lending.
Pradhan Mantri Mudra Yojana (PMMY)
The Pradhan Mantri Mudra Yojana (PMMY) is a central government scheme that helps very small businesses get collateral-free loans (loans without pledging property) from banks and other lenders. It is meant for non-corporate, non-farm small and micro enterprises, like a tailoring shop, a tea stall, a repair workshop or a beauty parlour. MUDRA itself does not lend directly to people. Banks, NBFCs (non-bank finance companies) and microfinance institutions give the loans.
Mudra loans are given without collateral, so the lender's main safety net is the CGFMU guarantee. Extending the fund till 2031 means banks can keep lending to first-time micro entrepreneurs without fearing a big loss if some loans go bad.
- CGFMU extended for 5 years, up to March 2031 (16th Finance Commission cycle, 2026-27 to 2030-31)
- Corpus: ₹5,000 crore; expected to support ₹12.6 lakh crore of PMMY loans
- Coverage: PMMY loans up to ₹20 lakh; PMJDY overdrafts up to ₹10,000; SHG loans of ₹10 lakh to ₹20 lakh
- Annual guarantee fee cut from 1% to 0.75%
- CGFMU launched January 2016; managed by NCGTC (incorporated 28 March 2014, owned by the Department of Financial Services)
- PMMY launched 8 April 2015; categories Shishu, Kishore, Tarun, Tarun Plus (up to ₹20 lakh)
- PMMY as of September 2026: 60.36 crore loans, ₹43.34 lakh crore sanctioned