Centre weights credit guarantee scheme for microfinance firms

extended by member-lending institutions to NBFC-MFls and MFIs for onward lending to small borrowers.

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Gross micro loan portfolio fell to ₹3.34 tn on 30 Nov 2025.

(MIN)

That scheme was valid till 31 March 2022, or till guarantees for an amount of 37,500 crore were issued.The government will take a final call on several budget proposals closer to the presentation date of February.

MFIs help in formalizing credit to low-income households and aid in the financial inclusion of people who otherwise approach informal, unregulated and exploitative credit sources. Credit guarantees lower the financing risk for banks and financial institutions and allow them to take larger exposure to MFIs.

The guarantor needs to pay only in case of a default by the borrower. The move is significant given that banks limit funding to MFls due to the inherent risks these institutions face while lending to small borrowers with limited means. The risk also puts a higher cost on MFI borrowings from banks, while also limiting fund flows to the sector.

Queries emailed to the finance ministry spokesperson on Friday remained unanswered.