Mudra Scheme Extended Until 2031

The Union Cabinet has approved the continuation of the Credit Guarantee Fund for Micro Units (CGFMU) under the Pradhan Mantri Mudra Yojana (PMMY) for another five years. The Cabinet has also approved a fund of ₹5,000 crore to facilitate loans under the scheme.

According to a government statement, the scheme provides credit guarantee coverage to lending institutions against the risk of default through the National Credit Guarantee Trustee Company Limited (NCGTC).

The scheme will now remain operational until March 31, 2031. Over the next five years, it is expected to facilitate loans worth ₹12.6 lakh crore under the Pradhan Mantri Mudra Yojana.

The statement said that since the launch of PMMY, more than 60.36 crore loans amounting to ₹43.34 lakh crore had been sanctioned by lending institutions up to September 2026. It added that the CGFMU, launched in January 2016, has been a key catalyst in expanding Mudra loan disbursements across the country.

The guarantee fee for lenders under the scheme has been reduced from 1% to 0.75% per annum. However, there will be no change in the guarantee fee applicable to loans extended to Self-Help Groups (SHGs), which will remain at 0.25% in the first year and 0.50% in subsequent years.

Under the scheme, Mudra loans will continue to be available during the tenure of the Sixteenth Finance Commission, from FY 2026-27 to FY 2030-31. In addition to loans of up to ₹20 lakh for eligible micro enterprises under PMMY, the fund also provides guarantees for overdraft facilities of up to ₹10,000 under the Pradhan Mantri Jan Dhan Yojana accounts. It also covers loans extended to SHGs where the portfolio size ranges between ₹10 lakh and ₹20 lakh.

The guarantee coverage is linked to the actual risk exposure of lending institutions. According to the press release, the Pradhan Mantri Mudra Yojana has provided collateral-free credit, helping create a generation of entrepreneurs who previously had limited or no access to formal credit facilities.

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