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News: The Government of India has introduced CGSMFI-2.0 to increase credit flow to microfinance institutions and support small borrowers.
About Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0)
- CGSMFI-2.0 is a credit guarantee scheme that provides cover to banks against losses on loans given to MFIs for small borrowers.
- Launched in: The scheme was launched in March 2026.
- Nodal department: The scheme is under the Department of Financial Services.
- Managed by: The scheme is managed by National Credit Guarantee Trustee Company Limited (NCGTC).
- Aim: The scheme aims to strengthen lending to MFIs and ensure continuous credit flow to small borrowers, supporting financial inclusion.
- Key Features
- Eligibility: The scheme covers existing or new small borrowers within the regulatory definition of microfinance as prescribed by RBI.
- Guarantee coverage: The scheme provides 80% coverage for small, 75% for medium, and 70% for large MFIs on defaulted amount.
- Interest rate cap: Loans to MFIs are capped at EBLR or MCLR plus 2%, and lending to borrowers is capped below recent average rates.
- Low guarantee fee: A fee of 0.50% per annum is charged on sanctioned amount in the first year and on outstanding amount thereafter.
- Defined limit and duration: The scheme is valid till 30 June 2026 or until ₹20,000 crore of loans are guaranteed.
