India Extends MFI Credit Guarantee, Lifts Loan Cap to ₹1,000 Crore

The government extended the Credit Guarantee Scheme for Microfinance Institutions-2.0, setting a deadline of August or until guarantees worth ₹20,000 crore are issued. The revised terms raise the maximum loan amount for large NBFC-MFIs and MFIs to ₹1,000 crore, according to a government statement.

So far, ₹770 crore in loans have been sanctioned under the scheme. The extension is intended to maintain credit flow to the microfinance sector, which has faced tighter regulation and rising asset-quality pressures. Lenders get partial guarantee cover on loans to smaller MFIs, reducing their credit risk.

Industry groups had pressed for higher limits, arguing that the earlier ₹750 crore cap constrained lending to a sector that serves low-income households. The higher cap allows larger NBFC-MFIs to include bigger portfolios under the guarantee umbrella, potentially easing their capital needs.

The scheme applies to loans extended by banks and non-bank lenders to microfinance institutions. It runs until the August deadline, unless the ₹20,000 crore guarantee pool is exhausted sooner.