Union Cabinet Extends CGFMU Scheme till March 2031: Key Details
The Union Cabinet has approved the extension of the Credit Guarantee Fund for Micro Units (CGFMU) scheme for another five years until March 31, 2031. Operating under the Ministry of Finance, the scheme provides credit guarantee coverage for collateral-free micro-loans to support small businesses.
What happened
The Union Cabinet, chaired by Prime Minister Narendra Modi, has officially approved the continuation of the Credit Guarantee Fund for Micro Units (CGFMU) scheme. The extension spans a five-year period covering the 16th Finance Commission cycle from Financial Year 2026-27 to Financial Year 2030-31, keeping the scheme active until March 31, 2031.
Along with the extension, the Cabinet approved a corpus of ₹5,000 crore for the fund. This financial backing is projected to facilitate collateral-free loans worth ₹12.6 lakh crore under the Pradhan Mantri Mudra Yojana (PMMY) over the five-year duration. The scheme acts as a sovereign-backed risk-mitigation mechanism, managing default risks for member lending institutions.
The credit guarantee coverage is operated and managed by the National Credit Guarantee Trustee Company Limited (NCGTC) under the aegis of the Department of Financial Services, Ministry of Finance. Furthermore, the annual guarantee fee charged to lending institutions has been reduced from 1.00% per annum to 0.75% per annum to encourage wider credit flow.
Important dates
| Original Scheme Launch | January 2016 |
|---|---|
| Cabinet Approval Date | 11 November 2026 |
| Extended Expiry Date | 31 March 2031 |
Eligibility
- Collateral-free loans extended to eligible micro-enterprises under the Pradhan Mantri Mudra Yojana (PMMY) up to ₹20 lakh.
- Overdraft facilities of up to ₹10,000 provided by banks on Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts.
- Loans granted to Self-Help Groups (SHGs) with credit portfolios between ₹10 lakh and ₹20 lakh.
📌 Static GK links
- CGFMU stands for Credit Guarantee Fund for Micro Units.
- NCGTC stands for National Credit Guarantee Trustee Company Limited.
- The CGFMU scheme was originally launched in January 2016.
- The sponsoring authority for the scheme is the Department of Financial Services under the Ministry of Finance.
What candidates should do
- Note down the exact extension year (March 2031) and the approved corpus amount (₹5,000 crore) for objective questions in upcoming banking exams.
- Memorize the full forms and executing agencies like NCGTC and the sponsoring ministry for general awareness sections in SSC and banking tests.
- Understand the coverage limits under PMMY, PMJDY overdrafts, and SHG loans associated with the CGFMU framework.
PrepZen analysis
The extension of the CGFMU scheme through the 16th Finance Commission cycle underscores the government's ongoing commitment to financial inclusion and support for micro-enterprises. By providing sovereign-backed risk coverage through NCGTC, banks and lending institutions are incentivized to extend collateral-free loans without the fear of compounding defaults. The reduction in the annual guarantee fee from 1.00% to 0.75% further lowers operational friction for lenders, ensuring steady liquidity flow to the grassroots economy via the Pradhan Mantri Mudra Yojana. For aspirants, this news carries high weightage in banking awareness and government schemes sections of competitive examinations.
Practice questions
Q1. Until which date has the Union Cabinet extended the Credit Guarantee Fund for Micro Units (CGFMU) scheme?
Q2. Which organization operates and manages the credit guarantee coverage under the CGFMU scheme?
Q3. What is the approved corpus for the CGFMU scheme announced during its recent cabinet extension?
Extended until March 31, 2031 (FY 2026-27 to 2030-31).
Scheme provides credit guarantee coverage to lending institutions.
NCGTC covers default risk for loans.
🎯 Key Point: CGFMU scheme extended to March 31, 2031 by Union Cabinet.
FAQs
What is the full form of CGFMU?
CGFMU stands for Credit Guarantee Fund for Micro Units.
When was the CGFMU scheme originally launched?
The CGFMU scheme was originally launched in January 2016 to support lending under the PM Mudra Scheme.
Which ministry administers the CGFMU scheme?
The scheme operates under the aegis of the Department of Financial Services, Ministry of Finance, Government of India.
What is the revised annual guarantee fee for lending institutions under the scheme?
The annual guarantee fee charged to lending institutions has been reduced from 1.00% per annum to 0.75% per annum.
What agency manages the trust and guarantee coverage?
The coverage is operated and managed through the National Credit Guarantee Trustee Company Limited (NCGTC).
Sources and references
- pmindia.gov.in (www.pmindia.gov.in) Official
- newsonair.gov.in (newsonair.gov.in) Official
- thehindu.com (www.thehindu.com)
- oquilia.com (www.oquilia.com)
Prepared by PrepZen for exam preparation. Consult the linked sources for original announcements and current details. Corrections policy. Spotted an error? Write to prepzen.app@gmail.com.
Practice Quiz — 13 November 2026
Q1. Who has been appointed as the new Chairman of Tata Investment Corporation Limited (TICL)?
Q2. The Union Cabinet recently approved the extension of which scheme until March 31, 2031, for another five years?
Q3. Which prominent personality attended the 105th Foundation Day celebrations of Tamilnad Mercantile Bank (TMB) in Thoothukudi?
Q4. What is Moody's revised GDP growth forecast for India's Financial Year 2026-27, as stated in its 'Global Macro Outlook 2027-28'?
Q5. What is the theme for the 45th India International Trade Fair (IITF 2026) which will be inaugurated in New Delhi?
A LITTLE PRACTICE. EVERY DAY.
Turn your reading into practice.
Daily current affairs, quizzes, vocabulary and a mistake bank — together in PrepZen.
Free Android app · Learn at your own pace
Good notes. One tap away.
Find study reels, PDF keywords and current affairs updates from PrepZen.