Mudra Loans Get Rs 5,000 Crore Guarantee Corpus Until 2031

Mudra loans will keep getting a government credit guarantee for five more years. The Union Cabinet on Wednesday, November 11, 2026, approved the continuation of the Credit Guarantee Fund for Micro Units (CGFMU) until March 31, 2031, with a corpus of Rs 5,000 crore. The government said this will enable Mudra loans of Rs 12.6 lakh crore under the Pradhan Mantri Mudra Yojana (PMMY) over the next five years.

The fund protects banks and other lenders against default on these loans, through the National Credit Guarantee Trustee Company Limited (NCGTC). With this decision, the guarantee fee that lenders pay on Mudra loans comes down from 1% a year to 0.75% a year. The fee for loans to Self Help Groups (SHGs) stays the same.

The Mudra loans guarantee decision at a glance

Which Mudra loans and other loans the fund covers

The fund gives lenders a guarantee on three kinds of credit. The first is Mudra loans of up to Rs 20 lakh given to eligible micro enterprises under PMMY. The second is overdrafts of up to Rs 10,000 that banks give on Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts. The third is loans to SHGs where the portfolio is between Rs 10 lakh and Rs 20 lakh.

The guarantee cover is now linked to the amount disbursed for working capital limits, and to the amount outstanding for term loans. The government said this reflects the actual risk that lenders carry. The scheme applies to all Mudra loans given during the Sixteenth Finance Commission cycle, from FY 2026-27 to FY 2030-31.

How Mudra loans grew to Rs 43.34 lakh crore since 2015

PMMY gives collateral-free loans to micro enterprises. As of September 2026, lenders had sanctioned more than 60.36 crore Mudra loans worth Rs 43.34 lakh crore since the scheme began, according to the government. The guarantee fund was launched in January 2016, and the government said it has been a major catalyst for the growth of Mudra loans.

The government on what Mudra loans have done for new entrepreneurs

"Collateral free loans under Pradhan Mantri Mudra Yojana has created a whole new generation of entrepreneurs who previously could not avail loans from formal banking system."

"The scheme will act as a catalyst to young aspiring entrepreneurs to set up and grow their business."

Where Mudra loans stand after the Cabinet decision

Lenders had sanctioned more than 60.36 crore Mudra loans worth Rs 43.34 lakh crore by September 2026. The Cabinet has now approved a Rs 5,000 crore corpus to keep the guarantee on these loans running until March 31, 2031, and the government said it will enable Mudra loans of Rs 12.6 lakh crore over the next five years.

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