Validity of scheme extended: MF
Under the Credit Guarantee Scheme for Microfinance Institutions 2.0 (CGSMFI 2.0), which was announced in March, loans up to ₹20,000 crore were to be guaranteed by the National Credit Guarantee Trustee Company (NCGTC). The scheme was originally scheduled to run till June 30 or till the guarantee of ₹20,000 crore is issued by NCGTC – whichever is earlier. On Wednesday, the government extended the validity of the scheme till August.
“The scheme was announced in March, but implementation picked up pace only after the FAQs were released in May, as April is generally a busy period for banks due to year-end activities and planning,” Alok Mishra, chief executive officer and director, MFIN, told Business Standard during an interaction.
“We are now seeing banks and institutions actively participating, and there are substantial applications in the pipeline. The extension provides additional time for the scheme to gain momentum and should provide the much-needed boost to funding, especially for small and medium MFIs. It also gives stakeholders more time to fully utilize the scheme and support the flow of credit into the sector,” he said.
The scheme provides guarantee cover to commercial banks and all India financial institutions for loans extended to Non-Banking Finance Company-Microfinance Institutions (NBFC-MFIs) and other MFIs for on-lending to existing or new small borrowers.
While initially the maximum loan limit for large MFIs was ₹100 crore, it was later increased to ₹1,000 crore. Micro lenders with assets under management (AUM) of Rs 2,000 crore or more are classified as large MFIs.
Mishra said there is already a lot of interest in the scheme, with large MFIs also applying and several applications in the pipeline. “Large MFIs have a large share in the portfolio and the increased limit of ₹1,000 crore can be easily absorbed as it will remain within the limit of 20 per cent of AUM,” he said.
He also said the increased threshold is expected to facilitate greater participation by eligible institutions and improve access to guaranteed funding. “With the improvement in liquidity support and general flow of funds through the guarantee scheme, the overall financing position of the sector is expected to strengthen,” he said.
The extension of exemption and validity period for larger MFIs came following requests from industry associations. Another industry official said, “As lenders became selective after asset quality deteriorated last year, funding costs had emerged as a concern. The extended guarantee cover provides comfort to banks and should support liquidity at a time when institutions are focusing on rebuilding growth in an orderly manner.”
According to CRIF High Mark’s latest report, the microfinance portfolio remained stable at ₹331.2 trillion in April 2026, registering a marginal growth of 0.1 per cent month-on-month. Active loans declined by 1.2 per cent over the same period, indicating an ongoing shift towards higher ticket size lending and portfolio consolidation, the report said.
“The guarantee cover certainly improves the comfort level from a credit perspective, especially for large and well-rated NBFC-MFIs. While banks will remain selective given the asset quality challenges in the sector, the increased limit provides room for lending to strong institutions with established track records,” said a senior public sector bank official.
The CRIF report found that the overall portfolio at risk (PAR) increased from 2.6 per cent in March 2026 to 2.5 per cent in April 2026, with one to 30 days PAR seeing a marginal increase of 0.6 per cent to 0.8 per cent, reflecting seasonal repayment variations.
