Cabinet extends micro-unit credit guarantee fund with ₹5,000 crore corpus

The Union Cabinet continued the Credit Guarantee Fund for Micro Units for five years on 11 November 2026. The approval runs until 31 March 2031 and provides a corpus of ₹5,000 crore. The government expects it to facilitate ₹12.6 lakh crore of loans under the Pradhan Mantri Mudra Yojana. The decision concerns support for lending institutions that finance micro units, rather than a new cash payment to every enterprise.

The fund provides credit guarantee coverage through the National Credit Guarantee Trustee Company Limited. Its function is to cover default risk within the scheme’s framework. The corpus is the backing for that guarantee arrangement; the projected loan volume describes credit expected to be extended by lenders. The two amounts should not be equated or added as if they were identical types of expenditure. A loan to an enterprise, a guarantee supporting a lender and the capital committed to a fund are three different parts of the financing structure.

Facts to remember

• Approval date: 11 November 2026; continuation until 31 March 2031.
• Approved corpus: ₹5,000 crore.
• Expected loan support: ₹12.6 lakh crore under the Pradhan Mantri Mudra Yojana.
• The National Credit Guarantee Trustee Company Limited provides the guarantee coverage to lending institutions.

Background

The Credit Guarantee Fund for Micro Units began in January 2016. It supports the expansion of Mudra lending by addressing default risk. By September 2026, lending institutions had sanctioned more than 60.36 crore Mudra loans worth ₹43.34 lakh crore since that programme began. Those cumulative loans are separate from the future lending expected under the new approval.

Why it matters for exams

For CLAT Economy, revise the difference between a guarantee and a loan, and match the fund with Mudra and its trustee company.