Cabinet extends Mudra loan guarantee fund and Stand-Up India scheme to March 2031
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.
Published 12 November 2026. Written by Pratidin from the reports linked at the end; every fact checked by a separate review before publishing. How we work
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?
- 1 and 2 only
- 2 and 3 only
- 1 and 3 only
- 1, 2 and 3
Show answer
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.
Use this in UPSC Mains: previous-year questions
Recurring theme: Financial inclusion and credit for micro and small entrepreneurs
- How to use this
Use the schemes to show how risk-sharing guarantees turn bank access into productive credit for excluded groups.
- Over 60.36 crore collateral-free Mudra loans worth about ₹43.34 lakh crore had been sanctioned by September 2026, backed by CGFMU guarantees.
- Stand-Up India, continued to 2031, has helped over 2.75 lakh women, SC and ST entrepreneurs with loans of ₹10 lakh to ₹1 crore.
- CGFMU also guarantees PMJDY overdrafts of up to ₹10,000, linking basic accounts to credit.
- How to use this
Cite CGFMU and Stand-Up India as credit policies for micro and small enterprises, including manufacturing units.
- CGFMU, extended to March 2031 with a ₹5,000 crore corpus, is expected to support ₹12.6 lakh crore of Mudra loans; non-SHG guarantee fee cut to 0.75%.
- Stand-Up India funds greenfield manufacturing, services and trading units up to ₹1 crore with 85% guarantee cover.
Asks the aim of PMMY; the CGFMU extension is the guarantee backbone of the same scheme.
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
- 1Borrower appliesA micro enterprise seeks a collateral-free loan
- 2Bank lendsUnder PMMY or Stand-Up India
- 3Bank pays a feeTo NCGTC, for example 0.75% a year for non-SHG Mudra loans
- 4If defaultThe guarantee fund pays the bank the covered share of the loss
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
- Loans up to ₹20 lakh for micro enterprises
- Over 60.36 crore loans sanctioned
- ₹5,000 crore guarantee corpus to 2031
- Above ₹10 lakh to ₹1 crore
- Women, SC and ST entrepreneurs, greenfield units
- ₹4,111 crore guarantee corpus to 2031
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.
Go deeper
Why it matters for UPSC
Mudra and Stand-Up India are favourite Prelims schemes, and credit guarantees are central to Mains questions on financial inclusion, MSMEs and inclusive growth.
The core idea
Pradhan Mantri Mudra Yojana lets banks lend small sums without collateral; the Credit Guarantee Fund for Micro Units carries much of the default risk. Stand-Up India does the same for larger greenfield loans to women, SC and ST borrowers. Together they are tools of Financial inclusion, moving small entrepreneurs from moneylenders to banks.
Numbers and dates to remember
- Both schemes continued to 31 March 2031 (decision: 11 November 2026)
- CGFMU: launched January 2016; corpus ₹5,000 crore; supports ₹12.6 lakh crore of loans
- Mudra so far: 60.36 crore loans, about ₹43.34 lakh crore (September 2026)
- Non-SHG guarantee fee: 1% cut to 0.75%
- Stand-Up India: April 2016; ₹4,111 crore corpus; 2.75 lakh helped; 2.5 lakh target
Where to go next
- Pradhan Mantri Mudra Yojana: the four loan tiers and who lends
- Credit Guarantee Fund for Micro Units: how the guarantee and fees work
- Stand-Up India: larger loans for women, SC and ST entrepreneurs
- Financial inclusion: why access to formal credit matters
Go deeper: do guarantees build enterprises or just loans?
The case for the extension
- Pradhan Mantri Mudra Yojana has reached over 60.36 crore loans, showing that small, collateral-free credit can scale.
- Cutting the non-SHG fee to 0.75% lowers the cost for lenders, which can pass through to borrowers.
- Linking cover to disbursed amounts (working capital) and outstanding balances (term loans) makes the Credit Guarantee Fund for Micro Units reflect real risk and cuts waste.
- Stand-Up India targets groups that face the steepest barriers to formal credit, with 85% guarantee cover.
The concerns
- Moral hazard: with most losses covered, banks may appraise less carefully, raising non-performing assets.
- Loan size: critics argue that small loans may sustain self-employment without creating many jobs.
- Continuity: Stand-Up India lapsed in March 2025 and was revived only in November 2026, a gap for would-be borrowers.
- Credit alone is not enough; first-time entrepreneurs also need skills, market access and mentoring.
Linking to the bigger picture Financial inclusion is measured not just by accounts and loans, but by whether people use credit productively. The renewed schemes should be judged by survival rates of funded firms, jobs created and repayment, not the count of loans sanctioned.
Exam angle Use these schemes as examples of state-backed risk sharing for inclusive growth, balanced by a note on credit discipline.
Pradhan Mantri Mudra Yojana
The four loan tiers and who lends
In one line: Launched on 8 April 2015, PMMY gives collateral-free loans to micro and small enterprises in manufacturing, trading and services, including allied agricultural activities.
The four tiers
- Shishu: up to ₹50,000
- Kishore: above ₹50,000 to ₹5 lakh
- Tarun: above ₹5 lakh to ₹10 lakh
- Tarun Plus: above ₹10 lakh to ₹20 lakh, for successful Tarun borrowers, from October 2024
Who lends
Scheduled commercial banks, regional rural banks, small finance banks, NBFCs and microfinance institutions, among others.
Why it is in the news
The guarantee fund behind Mudra loans has been extended to 2031. More than 60.36 crore loans worth about ₹43.34 lakh crore had been sanctioned by September 2026.
Where to go next
Credit Guarantee Fund for Micro Units
How the guarantee and fees work
In one line: CGFMU, launched in January 2016 and run through the National Credit Guarantee Trustee Company (NCGTC), protects lenders against default on small loans so that they can lend without collateral.
What it covers
- PMMY loans to micro enterprises of up to ₹20 lakh.
- Overdrafts of up to ₹10,000 in PM Jan Dhan Yojana accounts.
- Certain Self Help Group loans.
The 2026 changes
- Continued to 31 March 2031, with a ₹5,000 crore corpus expected to support ₹12.6 lakh crore of loans.
- Guarantee fee for non-SHG loans cut from 1% to 0.75% a year; SHG fees unchanged at 0.25% in year one and 0.50% after.
- Cover linked to disbursed working capital and outstanding term loan balances.
- Applies across the Sixteenth Finance Commission cycle, 2026-27 to 2030-31.
Where to go next
Stand-Up India
Larger loans for women, SC and ST entrepreneurs
In one line: Launched in April 2016, Stand-Up India helps women, SC and ST entrepreneurs get bank loans above ₹10 lakh and up to ₹1 crore to set up new enterprises.
How it works
- Original aim: loans to SC or ST borrowers and at least one woman borrower per bank branch of scheduled commercial banks.
- Greenfield (new) enterprises in manufacturing, services, trading and agri-allied activities.
- Composite loans (term loan plus working capital) or term loans covering up to 85% of project cost.
- A credit guarantee covering 85% of the loan, at a standard fee of 0.50%.
Why it is in the news
The scheme ended in March 2025. On 11 November 2026 the Cabinet continued it to 31 March 2031 with a ₹4,111 crore guarantee corpus and a target of 2.5 lakh more entrepreneurs, after more than 2.75 lakh so far.
Where to go next
Financial inclusion
Why access to formal credit matters
In one line: Financial inclusion means giving individuals and small businesses affordable access to formal financial services: savings, credit, insurance, pensions and payments.
Why credit is the hard part
Opening a bank account is now easy, but getting a loan still depends on collateral and credit history. Small borrowers without either fall back on moneylenders at high interest.
How guarantees help
Public guarantee funds take on part of the default risk, so banks can lend to first-time and collateral-less borrowers. PMJDY overdrafts, Mudra loans and Stand-Up India loans are all backed this way.
Measuring success
Count of loans is only a start. Usage, repayment, enterprise survival and income gains show whether inclusion is real.
Where to go next
Take the 12 November 2026 quiz: 30 Prelims-style questions with answers