Overview: The Union Cabinet has approved the continuation of the Credit Guarantee Fund for Micro Units (CGFMU) and the Stand-Up India Scheme until 31st March, 2031. The two initiatives have received corpus allocations of ₹5,000 crore and ₹4,111 crore, respectively. The CGFMU extension is expected to facilitate ₹12.6 lakh crore in Pradhan Mantri Mudra Yojana (PMMY) loans over five years. The Cabinet has also reduced the annual Mudra guarantee fee from 1% to 0.75%.
The decision extends credit guarantee support for micro-enterprises and eligible entrepreneurs. Businesses planning to approach banks can use this period to organise their financial records and project documentation.
₹9,111 Crore for Two Credit Guarantee Funds
The Union Cabinet, on 11th November, 2026, approved the continuation of two credit guarantee initiatives until 31st March, 2031.
The approved corpus allocations are:
- CGFMU: ₹5,000 crore to provide credit guarantee coverage to lending institutions against default risk on eligible loans. The fund is managed by the National Credit Guarantee Trustee Company Limited (NCGTC), which acts as its trustee.
- Stand-Up India: ₹4,111 crore as a credit guarantee corpus to support lending to women and Scheduled Caste (SC)/Scheduled Tribe (ST) entrepreneurs setting up new businesses.
The Cabinet approved the two extensions separately on the same day; the allocations do not form a single pooled fund. Over the next five years, the Stand-Up India extension aims to benefit at least 2.5 lakh additional entrepreneurs. The CGFMU extension, meanwhile, is expected to support PMMY loans worth ₹12.6 lakh crore during FY 2026-27 to FY 2030-31, covering the XVIth Finance Commission cycle.
These are separate Cabinet approvals announced on the same day, not a single pooled fund. The Stand-Up India extension targets at least 2.5 lakh additional beneficiaries over five years. The CGFMU extension is expected to facilitate PMMY loans worth ₹12.6 lakh crore during FY 2026-27 to FY 2030-31, the 16th Finance Commission cycle.
The guarantee funds support eligible lending institutions against specified defaults. They do not provide direct loans or grants to entrepreneurs. Banks will continue to assess applications and repayment capacity.
Mudra Guarantee Fee Reduced from 1% to 0.75%
The Cabinet has approved reducing the annual CGFMU guarantee fee from 1% to 0.75%. The fee structure for Self-Help Groups (SHGs) remains unchanged:
- First year: 0.25%
- Subsequent years: 0.50%
The guarantee fee is paid by the Member Lending Institution (MLI) to NCGTC. However, the lender may recover an equivalent amount from the eligible borrower at its discretion.
The Cabinet has also specified a revised basis for calculating guarantee coverage. For working capital limits, coverage will be linked to the amount disbursed. For term loans, it will be based on the outstanding loan amount. This calculation reflects the actual credit exposure of lending institutions.
The CGFMU framework covers the following credit facilities:
- PMMY loans of up to ₹20 lakh to eligible micro-enterprises.
- Overdraft facilities of up to ₹10,000 under the Pradhan Mantri Jan Dhan Yojana (PMJDY).
- Specified SHG loan portfolios between ₹10 lakh and ₹20 lakh.
Four Categories of Mudra Loans
Under PMMY, loans are divided into four categories according to the amount required by the borrower.
| No. | Category | Loan Amount |
|---|---|---|
| 1 | Shishu | Up to ₹50,000 |
| 2 | Kishore | Above ₹50,000 to ₹5 lakh |
| 3 | Tarun | Above ₹5 lakh to ₹10 lakh |
| 4 | Tarun Plus | Above ₹10 lakh to ₹20 lakh |
Tarun Plus is available to entrepreneurs who have successfully repaid an earlier loan under the Tarun category.
By September 2026, lending institutions had sanctioned more than 60.36 crore Mudra loans amounting to ₹43.34 lakh crore since the scheme’s launch.
CGFMU and CGTMSE Are Different Guarantee Schemes
CGFMU should not be confused with the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). Both provide credit guarantee support, but they operate under separate frameworks.
CGFMU covers eligible PMMY loans up to ₹20 lakh, specified PMJDY overdrafts and certain SHG loan portfolios.
CGTMSE provides guarantee coverage for eligible credit facilities extended to micro and small enterprises. Under its current scheme document, the eligible credit facility limit is up to ₹10 crore for specified categories of lending institutions. The maximum guarantee coverage is also capped at ₹10 crore per borrower for these categories. The actual guarantee percentage varies according to the borrower’s category and loan amount.
The November 2026 Cabinet approval concerns CGFMU and does not represent an extension of CGTMSE.
Stand-Up India: Loans for Women and SC/ST Entrepreneurs
The Stand-Up India Scheme supports women and SC/ST entrepreneurs establishing greenfield enterprises. Eligible activities include manufacturing, services, trading and activities allied to agriculture.
Eligible borrowers can seek a term loan or a composite loan combining working capital and term finance. The loan amount must be above ₹10 lakh and up to ₹1 crore, and can cover up to 85% of the project cost.
The borrower must contribute at least 10% of the project cost from their own funds. The margin money requirement can be up to 15%, with support available through convergence with eligible Central or State Government schemes.
Separately, the credit guarantee covers 85% of the loan amount. The standard guarantee fee is 0.50%.
For non-individual enterprises, at least 51% of the shareholding and controlling stake must be held by a woman or an SC/ST entrepreneur, as applicable under the scheme’s eligibility conditions.
Since its launch in April 2016, Stand-Up India has facilitated loans to more than 2.75 lakh women and SC/ST entrepreneurs. The extended scheme targets at least 2.5 lakh additional beneficiaries.
Documents to Prepare Before Approaching Banks
The extension gives eligible entrepreneurs more time to plan their businesses and arrange the documents required for bank finance. Banks assess the project, financial requirements and repayment capacity before sanctioning a loan.
Businesses should pay attention to the following areas:
Business registration: Select an appropriate business structure, such as a proprietorship, One Person Company (OPC), Limited Liability Partnership (LLP) or private limited company. Obtain Udyam and GST registration wherever applicable. A particular business structure or GST registration is not compulsory for every Mudra loan applicant.
Detailed Project Report (DPR): Banks may ask for a Detailed Project Report (DPR) for MSME loans, particularly for new projects and higher-value loan applications. It should explain the nature of the business, project cost, funding requirements, expected revenue and repayment projections.
Credit Monitoring Arrangement (CMA) data: Banks may also require a CMA report for bank loan appraisal. It generally includes historical and projected financial statements, key financial ratios and working capital calculations. These details help the lender assess the business’s financial position and funding requirements. The exact documents depend on the lender and the nature of the loan proposal.
Financial records and tax compliance: Maintain proper books of account and file applicable Income Tax Returns (ITRs) and GST returns. Updated records help businesses explain their financial position and respond to questions during loan appraisal.
Setindiabiz Support
Setindiabiz helps businesses prepare financial documents and complete the registrations required for business operations and bank financing. Our services include DPR preparation, CMA reports and projected financial statements.
For business formalisation, Setindiabiz professionals handle proprietorship registration, company incorporation, Udyam registration and GST registration, wherever applicable.
After a business starts operations, Virtual CFO services cover bookkeeping, bank reconciliation, monthly MIS and GST/TDS return compliance. Businesses can also use income-tax services for applicable return filing.
FAQs
CGFMU provides guarantee coverage for eligible PMMY loans up to ₹20 lakh and specified PMJDY and SHG facilities. CGTMSE operates under a separate framework for eligible micro and small enterprise credit facilities, with a credit facility limit of up to ₹10 crore for specified lending institution categories.
The annual guarantee fee under CGFMU has been reduced from 1% to 0.75%. The SHG fee remains 0.25% in the first year and 0.50% in subsequent years.
Eligible women and SC/ST entrepreneurs setting up greenfield enterprises in manufacturing, services, trading or agriculture-allied activities can apply for loans above ₹10 lakh and up to ₹1 crore, subject to scheme conditions.
A DPR is not a universal requirement for every Mudra loan. Banks may ask for one, particularly for new projects and higher-value loan applications, to assess project viability and repayment capacity.
The continuation of CGFMU and Stand-Up India extends credit guarantee support for another five years. Entrepreneurs planning to seek finance should check the eligibility conditions and arrange their project reports, financial projections and applicable business registrations before approaching banks.
