# Cabinet extends Mudra loan guarantee fund and Stand-Up India scheme to March 2031

URL: https://upsc.help/current-affairs/2026-11-12/cgfmu-stand-up-india-2031/
Date: 12 November 2026 (2026-11-12)
Source: The Hindu, Page 10
UPSC papers: GS3, GS2
Publisher: upsc.help (Pratidin), free and open-source UPSC Civil Services current affairs. Not affiliated with UPSC. Every fact was checked against the source reports by a separate review before publishing.

**In one line:** The Centre has renewed, until March 2031, the guarantee fund behind collateral-free Mudra loans and the Stand-Up India scheme for women, SC and ST entrepreneurs.

The Union Cabinet on 11 November 2026 approved the continuation of two credit schemes for five years, up to 31 March 2031. The first is the Credit Guarantee Fund for Micro Units (CGFMU), launched in January 2016, under which the National Credit Guarantee Trustee Company Limited (NCGTC) protects lending institutions against default on small loans. The approved corpus is ₹5,000 crore, expected to support Pradhan Mantri Mudra Yojana (PMMY) loans worth ₹12.6 lakh crore over five years. As of September 2026, lenders had sanctioned more than 60.36 crore Mudra loans worth about ₹43.34 lakh crore since the scheme began.

CGFMU covers PMMY loans to eligible micro enterprises of up to ₹20 lakh, overdrafts of up to ₹10,000 in Pradhan Mantri Jan Dhan Yojana accounts, and certain Self Help Group (SHG) loans. The guarantee fee for non-SHG loans falls from 1% to 0.75% a year, while the SHG fee stays at 0.25% in the first year and 0.50% after that. Guarantee cover will be linked to the amount actually disbursed for working capital limits and to the outstanding balance for term loans, so that it reflects the lender's real risk. The extension covers PMMY loans in the Sixteenth Finance Commission cycle, 2026-27 to 2030-31.

The second decision continues the Stand-Up India scheme, launched in April 2016 to finance women, Scheduled Caste and Scheduled Tribe entrepreneurs setting up new (greenfield) enterprises. The scheme had ended in March 2025, and the Finance Minister told the Lok Sabha in March 2026 that a revamped version would follow. It has facilitated loans to more than 2.75 lakh such entrepreneurs, and now aims at 2.5 lakh more over five years. Loans above ₹10 lakh and up to ₹1 crore can cover up to 85% of project cost in manufacturing, services, trading and agri-allied activities, with a ₹4,111 crore credit guarantee corpus covering 85% of the loan at a fee of 0.50%. The government presents both as tools for financial inclusion; the open questions are loan quality and whether guarantees reach first-time borrowers rather than existing ones.

## Prelims facts

- CGFMU, launched in January 2016 and run through NCGTC, is extended to 31 March 2031 with a ₹5,000 crore corpus to support ₹12.6 lakh crore of Mudra loans.
- Over 60.36 crore PMMY loans worth about ₹43.34 lakh crore had been sanctioned by September 2026.
- The CGFMU guarantee fee for non-SHG loans is cut from 1% to 0.75% a year; SHG fees stay at 0.25% and 0.50%.
- Stand-Up India, launched in April 2016 for women, SC and ST entrepreneurs, is continued to 31 March 2031 with a ₹4,111 crore guarantee corpus and a target of 2.5 lakh more entrepreneurs.
- Stand-Up India loans range above ₹10 lakh to ₹1 crore for greenfield enterprises, covering up to 85% of project cost.

## Quick recall

- **When was PMMY launched?** 8 April 2015.
- **Who operates the Credit Guarantee Fund for Micro Units?** The National Credit Guarantee Trustee Company Limited (NCGTC).
- **New CGFMU guarantee fee for non-SHG loans?** 0.75% a year, down from 1%.
- **CGFMU corpus approved in November 2026?** ₹5,000 crore, to support ₹12.6 lakh crore of PMMY loans over five years.
- **Maximum Mudra loan under Tarun Plus?** ₹20 lakh.
- **Stand-Up India loan range?** Above ₹10 lakh and up to ₹1 crore.
- **Stand-Up India credit guarantee corpus to 2031?** ₹4,111 crore; guarantee covers 85% of the loan at 0.50% fee.
- **Stand-Up India target for the next five years?** 2.5 lakh additional women, SC and ST entrepreneurs.

## Prelims practice question

With reference to the Stand-Up India scheme, consider the following statements:
1. It finances only enterprises in the manufacturing sector.
2. It provides loans above ₹10 lakh and up to ₹1 crore to women, SC and ST entrepreneurs for greenfield enterprises.
3. It has been continued up to 31 March 2031.
Which of the statements given above are correct?

(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer: (b) 2 and 3 only. Statement 1 is wrong: manufacturing, services, trading and agri-allied activities are eligible. Statements 2 and 3 are correct as per the Cabinet decision of 11 November 2026.

## UPSC previous-year questions this connects to

- UPSC Prelims 2016, Prelims: Pradhan Mantri MUDRA Yojana is aimed at (a) bringing the small entrepreneurs into formal financial system (b) providing loans to poor farmers for cultivating particular crops (c) providing pensions to old and destitute persons (d) funding the voluntary organizations involved in the promotion of skill development and employment generation (https://upsc.help/pyq/q189-pradhan-mantri-mudra-yojana-aimed-bringing-small/)
- UPSC Mains 2026, GS3: Examine the view that financial inclusion is an integral part of social and economic inclusion in a country like India. Also throw light on the usefulness of the R.B.I.'s Financial Inclusion Index. (https://upsc.help/pyq/q162-view-financial-inclusion-integral-part-social-economic/)
  How to use this story in the answer: Use the schemes to show how risk-sharing guarantees turn bank access into productive credit for excluded groups.
- UPSC Mains 2023, GS3: Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. (https://upsc.help/pyq/q008-faster-economic-growth-requires-increased-share-manufacturing/)
  How to use this story in the answer: Cite CGFMU and Stand-Up India as credit policies for micro and small enterprises, including manufacturing units.

## Mains practice question

How do credit guarantee schemes such as CGFMU and Stand-Up India promote financial inclusion of micro entrepreneurs and marginalised groups? Discuss their limitations. (150 words)

### Model answer

On 11 November 2026 the Cabinet extended the Credit Guarantee Fund for Micro Units (CGFMU) and Stand-Up India to 31 March 2031.

## How guarantees promote inclusion
- **Risk sharing**: NCGTC covers default risk, so banks lend without collateral.
- **Scale**: over 60.36 crore Mudra loans worth about ₹43.34 lakh crore by September 2026; ₹5,000 crore corpus to back ₹12.6 lakh crore more.
- **Lower cost**: non-SHG guarantee fee cut from 1% to 0.75%.
- **Targeting**: Stand-Up India gives women, SC and ST entrepreneurs ₹10 lakh to ₹1 crore for greenfield units, with 85% guarantee cover; 2.75 lakh helped.

## Limitations
- Guarantees can weaken credit appraisal and raise bad loans.
- Small loans may sustain self-employment rather than create jobs.
- Stand-Up India lapsed in March 2025 before its revival.
- First-time borrowers may still lack handholding and markets.

Guarantees open the door; skills, market links and careful appraisal keep enterprises alive.

## The basics

## Why this matters
A street vendor, a tailor or a first-time woman entrepreneur rarely has land or gold to pledge. Banks hesitate to lend without collateral. Credit guarantee schemes solve this by having a public fund promise to repay most of the loss if the borrower defaults.

## How a credit guarantee works

## The Mudra ladder
Pradhan Mantri Mudra Yojana, launched on 8 April 2015, gives collateral-free loans to micro enterprises in four tiers, and the Credit Guarantee Fund for Micro Units backs them.

## Mudra versus Stand-Up India

## Where the debate lies
Supporters say guarantees are the cheapest way to bring the unbanked into formal credit, a core idea of Financial inclusion. Critics warn that if banks know losses are covered, they may appraise loans less carefully, and that many small loans may not build lasting firms. Stand-Up India had lapsed in March 2025 and is now being continued with a target of 2.5 lakh more entrepreneurs. The real measure of success will be how many of these firms survive and hire.

## Sources

- https://www.pmindia.gov.in/en/news_updates/cabinet-approves-continuation-of-credit-guarantee-fund-for-micro-units/
- https://www.pmindia.gov.in/en/news_updates/cabinet-approves-continuation-of-stand-up-india-scheme/
- https://newsonair.gov.in/union-cabinet-approves-continuation-of-credit-guarantee-fund-for-micro-units-under-pm-mudra-yojana-till-march-2031/
- https://www.newsonair.gov.in/fm-nirmala-sitharaman-announces-revamped-stand-up-india-scheme-for-sc-st-and-women-entrepreneurs
- https://www.insightsonindia.com/2024/10/30/tarun-plus/