A ₹5,000 crore safety net for India's smallest businesses just got stronger. Union Home Minister Amit Shah on Wednesday, 11 November 2026, welcomed the Union Cabinet's approval of the continuation of the Credit Guarantee Fund for Micro Units, calling it a shot of 'new octane' for young entrepreneurs across the country.

What the Cabinet greenlit — and what it means for borrowers

The refreshed fund carries an enhanced corpus of ₹5,000 crore and underpins the Pradhan Mantri Mudra Yojana (PMMY), the flagship credit scheme launched on 8 April 2015 to channel formal loans to non-corporate, non-farm micro enterprises. Shah highlighted that the scheme has now channelled ₹12.60 lakh crore in Mudra loans — a figure that represents millions of small shops, roadside vendors, artisans, and first-generation entrepreneurs who previously had no access to institutional credit.

The sharpest immediate change: the annual guarantee fee has been trimmed from 1% to 0.75%. That quarter-point cut directly reduces the cost of borrowing for micro-unit owners, since lenders typically pass guarantee fees through to borrowers as part of the effective interest rate. For someone running a small tailoring unit or a food stall on a ₹5 lakh Mudra loan, it translates into real rupees saved every year.

The guarantee mechanism that makes Mudra work

Here is why the Credit Guarantee Fund matters as much as the loan scheme itself. Banks and NBFCs are willing to lend to micro borrowers — many of whom lack collateral or formal credit histories — precisely because the fund absorbs a portion of the default risk. Without that backstop, lenders price in higher risk through steeper rates or simply decline applications. Every rupee added to the guarantee corpus effectively unlocks a larger multiple in sanctioned loans.

Since 2015, the corpus has seen periodic top-ups as Mudra loan volumes scaled. This latest enhancement is designed to keep pace with government targets that push annual Mudra disbursements higher each financial year — and to support a newer generation of digital-first micro entrepreneurs entering the formal economy for the first time.

Shah frames it as Modi's job-creator vision in action

Amit Shah framed the Cabinet decision explicitly within Prime Minister Narendra Modi's stated goal of converting young Indians from job-seekers into job-creators. That framing is deliberate: Mudra's original design philosophy was to treat entrepreneurship at the bottom of the pyramid as a scalable employment engine, not a welfare measure. The reduced guarantee fee and expanded corpus are presented as levers to accelerate that conversion — giving more young people the financial runway to hire their first employee rather than look for one.

Whether the new numbers translate into higher sanction rates and lower default ratios will become visible in the next financial year's disbursement data and in parliamentary questions to the Finance Ministry. The direction, however, is unambiguous: the government is doubling down on the bet that micro credit, when de-risked for lenders, is one of the most cost-effective ways to generate grassroots employment at scale.