Source: Mint
Context:
The Government of India launched the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) in March 2026 to inject ₹20,000 crore liquidity into the microfinance sector and support financial inclusion.
About CGSMFI-2.0
- A credit guarantee scheme where the government provides default risk cover to banks (Member Lending Institutions – MLIs)
- Covers loans extended to:
- NBFC-MFIs
- Other Microfinance Institutions (MFIs)
Purpose:
- Encourage lending to high-risk microfinance segment
- Reduce credit risk for banks
Implementing Agencies
- Department of Financial Services – Nodal department
- National Credit Guarantee Trustee Company Limited – Provides guarantee cover
Aim of the Scheme
- Strengthen liquidity of MFIs
- Ensure continuous credit flow to small borrowers
- Promote:
- Financial inclusion
- Rural economic stability
Key Features
1. Tiered Guarantee Coverage
- 80% – Small MFIs
- 75% – Medium MFIs
- 70% – Large MFIs
Focus: Prioritises smaller institutions
2. Interest Rate Regulation
- Bank → MFI lending capped at:
- EBLR/MCLR + 2%
- MFI → Borrower lending:
- Must be 1% below average lending rate (last 6 months)
3. Low Guarantee Fee
- 0.50% per annum
- Affordable risk mitigation for lenders
4. Time-bound Scheme
- Valid till 30 June 2026
- Or until ₹20,000 crore guarantee limit is reached
5. Target Beneficiaries
- Focus on small borrowers (as per RBI definition)
- Ensures credit reaches:
- Low-income households
- Underserved rural population
