New Delhi: In a major boost to small businesses and aspiring entrepreneurs, the Union Cabinet has approved the continuation of the Credit Guarantee Fund for Micro Units (CGFMU) for another five years. The scheme will remain operational until March 31, 2031.
The decision was taken at a Cabinet meeting chaired by Prime Minister Narendra Modi on November 11, 2026. The move is expected to strengthen credit access for micro-enterprises and encourage self-employment across the country.
The government has approved a ₹5,000 crore corpus for the scheme. It is expected to facilitate approximately ₹12.6 lakh crore in loans under the Pradhan Mantri Mudra Yojana (PMMY) over the next five years.
Mudra Loan Scheme: What Has the Government Announced?
Under the extended framework, eligible micro-enterprises can receive credit guarantee coverage for Mudra loans of up to ₹20 lakh.
The guarantee is provided to lending institutions through the National Credit Guarantee Trustee Company Limited (NCGTC). It helps banks and other eligible financial institutions manage the risk of loan defaults.
The extension will cover loans sanctioned during the financial years 2026-27 to 2030-31.
Key Features of the Extended Mudra Loan Scheme
The government’s decision includes several important changes and provisions:
- Loans up to ₹20 lakh: Eligible micro-enterprises can receive credit guarantee coverage for loans under PMMY.
- ₹5,000 crore corpus: The approved fund is expected to support approximately ₹12.6 lakh crore in Mudra loans.
- Jan Dhan overdraft: Overdraft facilities of up to ₹10,000 under Pradhan Mantri Jan Dhan Yojana accounts will also receive guarantee coverage.
- Self-Help Groups: Eligible SHG loan portfolios between ₹10 lakh and ₹20 lakh will remain covered.
- Lower guarantee fee: The annual guarantee fee for eligible PMMY loans has been reduced from 1% to 0.75%.
- Five-year extension: The scheme will continue until March 31, 2031.
The existing guarantee fee structure for Self-Help Groups will remain unchanged. It stands at 0.25% for the first year and 0.50% in subsequent years.
Mudra Loan Scheme: Over 60 Crore Loans Sanctioned
The Pradhan Mantri Mudra Yojana has recorded significant growth since its launch in April 2015.
According to official government figures, more than 60.36 crore loans had been sanctioned across India by September 2026.
The total sanctioned loan amount stood at approximately ₹43.34 lakh crore.
The Credit Guarantee Fund for Micro Units, launched in January 2016, has played an important role in expanding access to institutional finance for small businesses.
Who Can Apply for a Mudra Loan?
The Pradhan Mantri Mudra Yojana primarily supports small businesses and micro-enterprises involved in income-generating activities.
Eligible sectors include manufacturing, trading and services. Certain agriculture-allied activities, including dairy, poultry and beekeeping, are also covered.
The scheme offers four loan categories:
1. Shishu: Loans up to ₹50,000.
2. Kishor: Loans above ₹50,000 and up to ₹5 lakh.
3. Tarun: Loans above ₹5 lakh and up to ₹10 lakh.
4. Tarun Plus: Loans above ₹10 lakh and up to ₹20 lakh. This category is available to entrepreneurs who have successfully repaid an earlier Tarun-category loan.
Loans are offered through participating banks, non-banking financial companies (NBFCs), microfinance institutions and other eligible lending institutions.
Does a Mudra Loan Require Collateral?
One of the major features of the Mudra scheme is access to institutional credit without conventional collateral.
The credit guarantee mechanism encourages lending institutions to extend loans to eligible micro-businesses by providing protection against a portion of the credit risk.
However, the guarantee is provided to the lending institution, not directly to the borrower. Applicants must still meet the lender’s eligibility requirements and repayment assessment.
A loan is not automatically approved simply because an applicant qualifies under the scheme.
How Will the Extension Benefit Small Businesses?
The continuation of the credit guarantee scheme is expected to improve access to formal banking finance for small entrepreneurs.
It could help people planning to start businesses, expand existing shops, purchase equipment or increase working capital.
Women entrepreneurs, small traders, service providers and self-employed individuals could also benefit from improved credit availability.
The reduction in the guarantee fee is another important step towards encouraging financial institutions to support micro-enterprises.
With the extension running until March 2031, the government aims to strengthen entrepreneurship and create more opportunities for self-employment across India.
The latest Cabinet decision reinforces the government’s focus on supporting small businesses through easier access to institutional credit and financial inclusion
URL Slug:mudra-loan-scheme-extended-till-2031
Focus Keyword: Mudra Loan Scheme 2026
Secondary Keywords:
- Mudra Loan up to ₹20 lakh
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Official Sources:
- Press Information Bureau – Cabinet announcement
- Department of Financial Services – Mudra Yojana details
Editorial note: The article distinguishes between a credit guarantee to lenders and an actual loan approval for borrowers. This is important to avoid misleading readers.
The article is written in natural news-reporting language. No one can guarantee how third-party AI detectors will classify a particular article.