Daijiworld Media Network - New Delhi

New Delhi, Mar 21: The government announced that around 36 lakh borrowers are expected to benefit from the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0), designed to strengthen credit flow to small borrowers through microfinance channels.

Under the scheme, the National Credit Guarantee Trustee Company Limited (NCGTC) will provide guarantee coverage to banks and financial institutions against potential losses on loans extended to NBFC-MFIs and MFIs. This support is expected to unlock additional credit of up to Rs 20,000 crore for lending to small borrowers.

The scheme applies to both existing and new borrowers who meet the Reserve Bank of India’s regulatory definition of microfinance. Guarantee coverage is structured based on the size of the lending MFI:

• 80% for small NBFC-MFIs/MFIs
• 75% for medium NBFC-MFIs/MFIs
• 70% for large NBFC-MFIs/MFIs

An official statement highlighted that microfinance institutions play a crucial role in financial inclusion, delivering credit to the economically weaker sections. “Ongoing financial stress in the microfinance sector has slowed bank lending to MFIs, making it difficult for smaller MFIs to access loans,” the statement noted.

The CGSMFI-2.0 aims to encourage banks and financial institutions to extend funding to NBFC-MFIs and MFIs for onward lending to eligible small borrowers. The scheme will remain in effect until June 30, 2026, or until loans worth ?20,000 crore are guaranteed, whichever occurs first.

By providing risk coverage, the initiative seeks to revive lending activity in the microfinance sector, ensuring greater access to credit for underserved communities.