The Union Cabinet on Wednesday, 11 November 2026 approved the continuation of the Credit Guarantee Fund for Micro Units (CGFMU) with a fresh corpus of ₹5,000 crore, extending the scheme by five years through 31 December 2031. The extension is projected to unlock ₹12.6 lakh crore in loans to micro enterprises over the same period, according to an official Cabinet statement.

What the CGFMU Does

Launched in January 2016, the CGFMU operates through the National Credit Guarantee Trustee Company Limited (NCGTC), providing credit guarantee coverage to lending institutions against default risk on eligible micro-enterprise loans. The fund acts as a backstop that enables banks and financial institutions to extend collateral-free credit — particularly to first-generation entrepreneurs who would otherwise be shut out of the formal banking system.

Guaranteed coverage applies to Pradhan Mantri Mudra Yojana (PMMY) loans of up to ₹20 lakh; overdrafts of up to ₹10,000 extended under Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts; and loans to Self Help Groups (SHGs) with portfolios between ₹10 lakh and ₹20 lakh.

Scale of PM Mudra Scheme So Far

The numbers underline the programme's reach. As of September 2026, more than 60.36 crore loans worth ₹43.34 lakh crore have been sanctioned by lending institutions since the launch of the PM Mudra Scheme. The CGFMU has been a central pillar in sustaining that volume, absorbing default risk that lenders would otherwise have priced into higher interest rates or stricter collateral demands.

How the Guarantee Coverage Works

Notably, the guaranteed coverage is calibrated to actual risk exposure: it is linked to the disbursement amount for working capital limits and to the outstanding amount for term loan accounts. This design prevents over-insurance of lenders while still incentivising credit flow to the highest-risk borrower segments.

The renewed scheme will apply to all PMMY loans extended during the XVIth Finance Commission Cycle — covering FY 2026-27 through FY 2030-31 — aligning its tenure directly with the medium-term fiscal planning framework.

What This Means for Entrepreneurs

According to the official statement, collateral-free PMMY loans have already created a new generation of entrepreneurs who previously had no access to institutional credit. The Cabinet framed the continuation as a catalyst for young aspiring entrepreneurs looking to set up or expand micro businesses. With the new corpus in place, the government expects lending momentum to be maintained across both rural and urban micro-enterprise segments through the end of the decade.

The next steps — including NCGTC's operational guidelines and lender empanelment criteria for the extended cycle — are expected to be notified in the weeks ahead.