About Credit Guarantee Scheme for Microfinance Institutions-2.0:
- It was launched in 2026.
- It aims to provide guarantee cover to Banks/ FIs through National Credit Guarantee Trustee Company Limited (NCGTC).
- It provides guarantee against expected losses on the financial assistance extended by them to Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs) and MFIs for on lending to small borrowers.
- The Government of India has also approved increase in maximum loan amount capped to Large Sized NBFC-MFIs/MFIs from ₹300 crores to ₹1000 crores under the overall ceiling of 20% of Assets under Management (AUM).
- Features of the Scheme:
- Eligible borrowers: Existing or new small borrowers within the regulatory definition of micro finance as prescribed by RBI from time to time.
- Guarantee coverage: 80% of amount in default for small, 75% for medium and 70% for large NBFC-MFIs/ MFIs.
- Guarantee Fee:50% p.a., on sanctioned amount (1st year) & outstanding amount (thereafter).
What is Microfinance?
- It refers to the provision of small-scale financial services, including loans, savings, and insurance, to individuals and small businesses that lack access to traditional banking services.
