Credit Guarantee Fund for Micro Units

Credit Guarantee Fund for Micro Units Latest News

The Union Cabinet, chaired has approved the continuation of Credit Guarantee Fund for Micro Units (CGFMU) for a period of five years upto 31.03.2031.

About Credit Guarantee Fund for Micro Units  

• It was launched in 2016.
• It has acted as a major catalyst in enabling the growth of Pradhan Mantri Mudra Yojana (PMMY) loans in the country.
• The scheme provides credit guarantee coverage to the Lending Institutions through National Credit Guarantee Trustee Company Limited (NCGTC) against default risk.
• Features
  • The fund will provide guarantee coverage for loans of up to ₹20 lakh extended to eligible micro enterprises under PMMY.
  • It will also cover overdrafts of up to ₹10,000 provided by banks through accounts under the Pradhan Mantri Jan Dhan Yojana (PMJDY).
  • Loans granted to self-help groups (SHGs) with a portfolio ranging from ₹10 lakh to ₹20 lakh will also be eligible for coverage.
  • The guarantee coverage will be linked to the actual credit exposure of lending institutions. For working capital facilities, it will be based on the amount disbursed, while for term loans, it will be linked to the outstanding loan amount.
  • Guarantee Fee: There will be reduction in the guarantee fee from 1 per cent per annum to 0.75 per cent per annum. The fee structure for SHG loans will remain unchanged, at 0.25 per cent for the first year and 0.50 per cent in subsequent years.
  • Duration of the Scheme: The Scheme would be applicable to all loans extended under PMMY.

Source: PIB

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