Approximately 36 lakh borrowers are expected to benefit from the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0), as stated by the government. The scheme’s objective is to provide guarantee cover to banks/FIs through the National Credit Guarantee Trustee Company Limited (NCGTC) against anticipated losses on financial assistance given to Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs) and MFIs for lending to small borrowers.
The scheme aims to offer credit guarantee support through NCGTC to enhance lending to MFIs, enabling increased credit flow of up to Rs 20,000 crore to the NBFC-MFIs. According to the scheme’s key features, both existing and new small borrowers falling within the regulatory definition of microfinance as prescribed by the RBI will be covered.
Guarantee coverage under the scheme entails 80% of the default amount for small, 75% for medium, and 70% for large NBFC-MFIs/MFIs. This initiative is set to boost credit flow to the MFI sector, recognizing the vital role microfinance plays in financial inclusion by providing credit to individuals at the base of the economic pyramid.
“NBFC-MFIs and MFIs are crucial players in microfinance lending. Due to the financial strain in the microfinance sector, there has been a slowdown in bank lending to MFIs, affecting smaller MFIs’ access to loans,” noted the official statement. The scheme aims to incentivize lending institutions to offer funding to NBFC-MFIs or MFIs for lending to small borrowers within the RBI’s defined microfinance framework.
The scheme’s validity extends until June 30, 2026, or until Rs 20,000 crores worth of loans are guaranteed, whichever occurs first, as per the statement.
