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

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The Government of India has approved the extension of the CGSMFI-2.0 scheme until 31st August 2026 or until guarantees totaling ₹20,000 crore are issued, whichever happens first.
The maximum loan limit for large NBFC-MFIs and MFIs under the scheme has increased from ₹300 crore to ₹1,000 crore, within an overall ceiling of 20% of their Assets under Management (AUM).
As of now, loans worth ₹770 crore have already received sanctions under the CGSMFI-2.0 framework.

CGSMFI-2.0 is a government-backed credit guarantee scheme launched in March 2026 to provide guarantee coverage to Member Lending Institutions (MLIs) for loans given to NBFC-MFIs and MFIs.
These microfinance institutions use the funds to provide further loans to eligible small borrowers under the microfinance definition set by the RBI.
Guarantee coverage depends on the size of the microfinance institution, where small institutions receive 80%, medium institutions receive 75%, and large institutions receive 70% of the defaulted amount, replacing the earlier flat 75% coverage.
Microfinance institutions are classified based on their Assets Under Management (AUM) into small with less than ₹500 crore, medium ranging from ₹500 crore to less than ₹2,000 crore, and large with ₹2,000 crore or more.
MLIs must ensure that at least 5% of total loans go to small microfinance institutions and 10% go to medium ones to encourage fair credit distribution.
Loan limits connect directly to the institution's AUM, featuring maximum caps of ₹100 crore for small institutions, ₹200 crore for medium institutions, and ₹300 crore for large institutions.
Institutions must disburse these loans within three months, keeping a maximum tenure of three years, which includes a one-year moratorium.
The scheme operates through an automatic approval mechanism at the National Credit Guarantee Trustee Company Ltd (NCGTC), ensuring funds go directly to incremental lending for underserved segments.

Microfinance institutions are financial intermediaries providing small loans and financial services to low-income households in rural and semi-urban regions.
They aim to promote financial inclusion, livelihood development, and the economic empowerment of poor populations lacking access to formal banks.
These institutions operate either as NBFC-MFIs or as cooperative and NGO-led structures.
Their target borrowers are small, low-income households, particularly women, who lack regular banking access.
Loan sizes typically range from ₹5,000 to ₹1,00,000 to support income-generating activities or emergency needs.
Loans usually require no collateral or very minimal security, depending instead on group lending or peer pressure mechanisms.
Delivery models include the Joint Liability Group (JLG) where borrowers form groups and share repayment responsibility, and Self-Help Groups (SHGs) which connect community models with banks.
The Reserve Bank of India (RBI) regulates NBFC-MFIs by defining eligibility criteria, loan sizes, interest rate caps, and prudential norms.
The National Bank for Agriculture and Rural Development (NABARD) provides refinance support and monitors SHG linked microfinance activities.

CGSMFI-2.0 provides credit guarantee cover to banks and financial institutions for loans extended to NBFC-MFIs and MFIs for onward lending to small borrowers.
Eligible borrowers include existing or new small borrowers meeting the RBI regulatory definition of microfinance.
Guarantee coverage stands at 80% for small NBFC-MFIs and MFIs, 75% for medium ones, and 70% for large institutions regarding defaulted amounts.
The maximum loan limit for large NBFC-MFIs and MFIs reaches ₹1,000 crore, up from ₹300 crore, staying within 20% of their AUM.