The Central Government has prolonged the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) until August 31, 2026, or until guarantees worth Rs 20,000 crore are issued, whichever comes first. Additionally, the maximum loan amount cap for large-sized NBFC-MFIs/MFIs has been raised from Rs 300 crore to Rs 1,000 crore under the 20% ceiling of Assets Under Management (AUM), as per a statement from the Finance Ministry.
This extension and the increased loan cap aim to enhance the scheme’s effectiveness and boost credit flow to the microfinance institutions sector. Launched on March 20, 2026, the CGSMFI-2.0 scheme provides guarantee cover to banks and financial institutions against expected losses on financial assistance extended to Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs) and MFIs for on-lending to small borrowers.
Loans amounting to Rs 770 crore have been sanctioned under the scheme to date. Eligible borrowers include existing and new small borrowers falling within the regulatory definition of microfinance as prescribed by the RBI. The guarantee coverage ranges from 70% to 80% of the default amount for large, medium, and small NBFC-MFIs/MFIs.
The scheme imposes a guarantee fee of 0.50% per annum on the sanctioned amount for the first year and on the outstanding amount thereafter. Interest rates are capped at EBLR or MCLR plus 2% per annum on loans by MLIs to NBFC-MFIs or MFIs. When lending to small borrowers, these institutions must limit the interest rate to 1% below the average lending rate during the previous six months, according to the Finance Ministry.
