Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0)
Why in News?
The Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) is in the news because the Government of India launched it on March 20, 2026, to address severe liquidity constraints in the microfinance sector.
About
- Liquidity Crisis Recovery: The scheme was introduced to counter a significant slowdown in bank lending to NBFC-MFIs caused by rising non-performing assets (NPAs) and recovery challenges.
- Sector Stabilization: It acts as a "sector-positive" stabilizer, specifically targeting smaller MFIs that have struggled to access fresh bank funding.
- Expansion of Credit: This ₹20,000 crore initiative is designed to restore lender confidence and ensure a steady flow of credit to approximately 36 lakh small borrowers at the bottom of the economic pyramid.
Key Features
- Management: Operated by the National Credit Guarantee Trustee Company (NCGTC).
- Guarantee Coverage: Tiered protection for MFIs, offering 80% for smaller, 75% for medium, and 70% for larger entities.
- Interest Rate Caps: Capped for MFIs at EBLR/1-year MCLR + 2%, requiring them to on-lend at least 1% lower than their previous average rate.
- Loan Terms: Maximum 3-year tenure with a one-year moratorium.
- Allocations: Dedicated portions for small (min 5%) and mid-sized (min 10%) MFIs based on AUM.
- Fees & Validity: Annual fee of 0.50%; valid until June 30, 2026, or until the ₹20,000 crore limit is met.
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