Sixty crore loans in a decade — and the engine just got a fresh tank of fuel. The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday, November 11, 2026, approved the continuation of the Credit Guarantee Fund for Micro Units (CGFMU) for five more years, through March 31, 2031, backed by a corpus of ₹5,000 crore.

Union Coal and Mines Minister G. Kishan Reddy shared the Cabinet decision on X, calling it a move to empower micro entrepreneurs through easier access to credit. The extension covers the entire XVI Finance Commission period (FY 2026–27 to FY 2030–31) and is projected to facilitate ₹12.6 lakh crore in fresh loans under the Pradhan Mantri Mudra Yojana (PMMY) over the next five years.

What CGFMU Actually Does — and Why the Guarantee Matters

At its core, CGFMU solves a stubborn problem: lenders hesitate to extend unsecured credit to micro entrepreneurs who have no collateral to pledge. The fund steps in as a guarantor, absorbing default risk and giving banks and microfinance institutions the confidence to lend. Without that backstop, millions of first-generation business owners would remain captive to informal moneylenders charging usurious rates.

The Cabinet decision also trims the guarantee fee on PMMY loans from 1% to 0.75% per annum — a reduction that directly lowers the effective cost of borrowing for micro enterprises. Coverage under the extended scheme includes collateral-free PMMY loans up to ₹20 lakh, eligible Pradhan Mantri Jan Dhan Yojana (PMJDY) overdrafts up to ₹10,000, and loans to Self-Help Groups (SHGs) with portfolios between ₹10 lakh and ₹20 lakh.

PMMY's Decade-Long Track Record: 60.36 Crore Loans, ₹43.34 Lakh Crore Disbursed

Launched in April 2015 to shift micro enterprises away from informal credit sources, PMMY has sanctioned over 60.36 crore loans totalling ₹43.34 lakh crore as of September 2026. That is a staggering volume of small-ticket credit flowing to roadside vendors, tailors, kirana owners, and village artisans — precisely the demographic that formal banking historically bypassed.

CGFMU was created alongside PMMY in 2015 as the guarantee architecture underpinning the scheme. Its corpus has been enhanced in subsequent years as loan volumes expanded — the latest ₹5,000 crore infusion signals that credit demand from the micro sector remains robust and is expected to grow further through the decade.

Employment and Inclusion: The Larger Bet

The government's stated goal extends beyond credit access. By backing collateral-free lending at scale, CGFMU is designed to convert aspiring entrepreneurs into actual employers — nudging the economy's vast informal underbelly toward formalization. Self-Help Groups, many of them women-led in rural India, benefit directly through the SHG portfolio coverage provision.

The linkage with PMJDY overdrafts is equally deliberate: it ties financial inclusion infrastructure built since 2014 directly to entrepreneurial credit — letting basic account holders access working-capital liquidity without paperwork or guarantors. One decision, three interlocking programmes. That is the structural logic the Cabinet is reinforcing.

With ₹12.6 lakh crore in targeted disbursements on the horizon, the real test over the next five years will be whether credit quality holds even as volumes climb — and whether first-generation entrepreneurs actually graduate into the formal economy or remain dependent on revolving guarantee cover.