Government introduces CGSMFI-2.0 to revive bank lending to microfinance institutions
On 21 March 2026 the Government introduced the Credit Guarantee Scheme for Microfinance Institutions-2.0, under which NCGTC will guarantee bank loans to NBFC-MFIs and MFIs, facilitating credit of up to ₹20,000 crore and benefiting about 36 lakh small borrowers.
Summary
The Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) provides guarantee cover through the National Credit Guarantee Trustee Company (NCGTC) to banks and financial institutions against expected losses on loans to NBFC-MFIs and MFIs for on-lending to small borrowers. Guarantee coverage is 80% of the amount in default for small, 75% for medium and 70% for large NBFC-MFIs/MFIs, at a fee of 0.50% a year. Interest on loans to MFIs is capped at EBLR or MCLR plus 2%, and MFIs must on-lend at 1% below their average lending rate of the past six months. The scheme is valid till 30 June 2026 or until loans of ₹20,000 crore are guaranteed, whichever is earlier, and is expected to reach about 36 lakh borrowers. It responds to a slowdown in bank lending to MFIs amid financial stress in the sector.
Key facts
- Scheme
- CGSMFI-2.0
- Guarantor
- National Credit Guarantee Trustee Company (NCGTC)
- Coverage
- 80% small, 75% medium, 70% large NBFC-MFIs/MFIs
- Guarantee fee
- 0.50% per year
- Interest cap
- EBLR/MCLR + 2% to MFIs; on-lending 1% below 6-month average
- Validity
- Till 30 June 2026 or ₹20,000 crore guaranteed
- Beneficiaries
- About 36 lakh small borrowers
Practice MCQs 3 questions
Through which entity does CGSMFI-2.0, introduced in March 2026, provide credit guarantee cover?
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Correct answer: B — National Credit Guarantee Trustee Company
CGSMFI-2.0 provides guarantee cover to banks and FIs through the National Credit Guarantee Trustee Company (NCGTC).
Under CGSMFI-2.0, what is the guarantee coverage for loans to small NBFC-MFIs/MFIs?
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Correct answer: D — 80% of the amount in default
Coverage is 80% for small, 75% for medium and 70% for large NBFC-MFIs/MFIs.
Consider the following about CGSMFI-2.0: 1. It is valid till 30 June 2026 or until loans of ₹20,000 crore are guaranteed, whichever is earlier. 2. MFIs must on-lend to small borrowers at 1% below their average lending rate of the past six months. Which of the above is/are correct?
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Correct answer: C — Both 1 and 2
Both are correct: the scheme runs till 30 June 2026 or ₹20,000 crore of guaranteed loans, and on-lending is capped at 1% below the six-month average rate.