The Government of India has extended the CGSMFI-2.0 until 31 August 2026, or until a guarantee limit of ₹20,000 crore is reached. The scheme aims to enhance credit flow to the microfinance sector by mitigating risks for lending institutions. Key updates include increasing the loan cap for large NBFC-MFIs from ₹300 crore to ₹1,000 crore.
Key Features and Impact
- Risk-Sharing Mechanism: Provides institutional guarantees covering 70% to 80% of potential defaults on loans extended by commercial banks to MFIs, reducing the risk premium.
- Operational Goal: Facilitates affordable credit to low-income households, women self-help groups (SHGs), and micro-entrepreneurs, curbing reliance on informal moneylenders.
- Regulatory Alignment: Mandates adherence to RBI’s Microfinance Regulations, which include income capping, fair practice codes, and interest rate guidelines.
IASPOINT Booster Facts for UPSC
- Microfinance Loan Criteria: Must be collateral-free with no prepayment penalties.
- Eligibility: Households with an annual income up to ₹3 lakh (rural and urban).
- Repayment Limit: Monthly loan repayment obligations for a household cannot exceed 50% of the monthly household income.
- Priority Sector Lending (PSL): Bank loans to MFIs for on-lending to individuals/SHGs qualify as PSL under the micro-enterprises sub-category.
- Institutional Matrix:
- NBFC-MFI: Regulated by RBI; targets low-income households.
- NGOs/Societies: Non-profit entities serving localized community segments.
- Small Finance Banks: RBI-regulated banks targeting unserved/underserved sections.