Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0)

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