Mudra Loan Credit Guarantee (CGFMU) extended to 2031: fee cut to 0.75%, loans up to Rs 20 lakh covered

The Union Cabinet has approved continuing the Credit Guarantee Fund for Micro Units (CGFMU) for five years, up to 31 March 2031, according to a PIB release dated 11 November 2026. The fund guarantees lenders against default on Mudra loans up to Rs 20 lakh, and the guarantee fee falls from 1% to 0.75% a year. The release says the extension will help make Rs 12.6 lakh crore of PM MUDRA Yojana (PMMY) loans available over the next five years, and it records that lenders have sanctioned over 60.36 crore PMMY loans worth Rs 43.34 lakh crore up to September 2026. This guide explains the decision in plain words, based only on the official release.

What has the Cabinet approved for Mudra loans?

The Union Cabinet, chaired by the Prime Minister, has approved the continuation of the Credit Guarantee Fund for Micro Units (CGFMU) for a period of five years, up to 31 March 2031. The decision was published by the Press Information Bureau on 11 November 2026. The PIB headline says credit guarantee will be provided for loans given under the Pradhan Mantri MUDRA Yojana, and that a fund of Rs 5,000 crore has been approved, which will help make Rs 12.6 lakh crore of PMMY loans available.

This is a continuation, not a brand new scheme. The fund was started in January 2016, and the Cabinet has now extended it so that it keeps working through the 16th Finance Commission period.

What is CGFMU and who does it protect?

CGFMU is a guarantee scheme. Under it, the National Credit Guarantee Trustee Company Limited (NCGTC) gives lending institutions a credit guarantee cover against the risk of loan default. In simple words, if a loan under the scheme turns bad, the lender has a guarantee behind it.

The guarantee is therefore given to the lender, such as a bank, and not to the borrower. The borrower does not apply to NCGTC. The benefit for a small entrepreneur is indirect: a lender that is protected against default can be more willing to lend without asking for collateral. The release itself says that Mudra loans, which are given without anything being pledged, have created a new generation of entrepreneurs.

Which loans are covered by the guarantee?

The release lists three types of credit facilities for which guarantees are provided.

Facility	Limit named in the release
Loans to eligible micro enterprises under PM MUDRA Yojana (PMMY)	Up to Rs 20 lakh
Overdraft facility given by banks under PM Jan Dhan Yojana (PMJDY) accounts	Up to Rs 10,000
Loans to self help groups (SHGs)	Portfolio between Rs 10 lakh and Rs 20 lakh

The scheme applies to all loans given under PMMY during the 16th Finance Commission period, that is FY 2026-27 to FY 2030-31. If you took or plan to take a Mudra loan in this period, it falls inside the window named in the release.

What changes in the guarantee fee?

The release states that the guarantee fee will be reduced from 1 per cent per annum to 0.75 per cent per annum. That is a cut of one quarter of a percentage point a year.

For self help groups, the fee does not change. The release says they will continue to pay 0.25 per cent in the first year and 0.50 per cent in the following years.

Category	Guarantee fee after the decision
Mudra and other covered loans (general)	0.75% a year (down from 1%)
Self help groups	0.25% in year one, 0.50% afterwards (no change)

The release does not say who bears this fee. Do not assume that a borrower will see a lower interest rate; ask the lender.

How is the guarantee cover calculated?

The release says the guarantee coverage will be linked to the amount disbursed in the case of working capital limits, and to the outstanding amount in the case of term loan accounts. The stated reason is that this should reflect the actual risk of the lending institutions.

In plain words: for a working capital limit, the cover follows the money actually released to the borrower, not the sanctioned limit on paper; for a term loan, it follows the balance still to be repaid. The release does not give the percentage of a defaulted amount that the guarantee pays, so that figure should not be quoted from this notice.

How big is the Mudra scheme today?

The release gives the scale of PM MUDRA Yojana. Since the scheme was launched, and up to September 2026, lending institutions have sanctioned more than 60.36 crore loans for a total of Rs 43.34 lakh crore. CGFMU itself started in January 2016 and, according to the release, has played an important role in promoting lending under PMMY.

Looking ahead, the release says that extending CGFMU will help make Rs 12.6 lakh crore of loans available over the next five years. These are figures from the Government’s own release; they are sanctioned amounts and targets, not a promise to any individual applicant.

What does this mean for a small business owner or SHG member?

Nothing changes in how you apply. You approach a bank or another lending institution, and the lender decides on the loan. The decision matters because it keeps the lender-side guarantee in place for five more years and makes it a little cheaper.

For an SHG, the guarantee band named in the release is a portfolio of Rs 10 lakh to Rs 20 lakh; ask your bank whether your group’s loans fall in that band. For a Jan Dhan account holder, the release mentions an overdraft facility of up to Rs 10,000, but it does not set the eligibility rules, so ask the bank. For all of these, keep your documents ready and get the sanction terms in writing.

How can you use this information safely?

Use it to ask better questions at the bank, not as a promise of a loan. A guarantee cover does not mean a loan is approved; the lender still checks the proposal.

Be careful of agents who ask for money to “get a Mudra loan sanctioned” or to “use the new guarantee”. The release gives no such role to agents, and the guarantee is between the fund and the lender. Check the scheme details only on pib.gov.in or with the bank branch itself. If you are a state-level reader, the scheme is the same across India; the release names no state-specific changes.

What the notice does not say

The release leaves several practical questions open, and this guide does not fill them with guesses.

• It does not say who pays the guarantee fee, the lender or the borrower, or whether the cut will reach the borrower.
• It does not state the percentage of a defaulted loan covered by the guarantee.
• It does not explain how lenders file claims or how long settlement takes.
• It does not change the Mudra loan limit, interest rate or eligibility conditions.
• It gives no application procedure for borrowers, because the guarantee is for lenders.

For these details, wait for the Ministry of Finance or NCGTC guidelines, or ask your lender.