Credit Guarantee Fund for Micro Units (CGFMU)

Introduction of Credit Guarantee Fund for Micro Units (CGFMU): A Brief Insight

A tea stall owner, a tailor or a small shopkeeper may need a loan of just a few lakhs to run or expand a business. However, banks often ask for a house or plot as collateral, which many micro entrepreneurs do not have. The Credit Guarantee Fund for Micro Units (CGFMU) addresses this problem by providing guarantee cover to lenders, encouraging them to offer collateral-free loans to eligible micro businesses.

The Government of India launched the fund in January 2016 to support loans provided under the Pradhan Mantri Mudra Yojana. It also covers eligible overdrafts on Jan Dhan accounts and loans given to Self Help Groups.

The National Credit Guarantee Trustee Company Limited (NCGTC) manages the fund. It operates under the Department of Financial Services, Ministry of Finance, Government of India.

The fund aims to reduce the risk lenders face when borrowers fail to repay their loans. This encourages banks, Non-Banking Financial Companies (NBFCs) and Microfinance Institutions (MFIs) to provide credit to first-time and small entrepreneurs without asking for collateral.

On 11 November 2026, the Union Cabinet approved the continuation of the fund for another five years, until 31 March 2031. It also approved a corpus of ₹5,000 crore, which is expected to support around ₹12.6 lakh crore in Mudra loans. By September 2026, lenders had sanctioned more than 60.36 crore Mudra loans worth approximately ₹43.34 lakh crore.

Under the fund, eligible micro enterprises can get loans of up to ₹20 lakh. It also covers Jan Dhan account overdrafts of up to ₹10,000 and eligible Self Help Group loans ranging from ₹10 lakh to ₹20 lakh. The annual guarantee fee paid by lenders for micro loans has also been reduced from 1% to 0.75%.

New and existing micro units, Joint Liability Groups, Self Help Groups and eligible Jan Dhan account holders can benefit from the fund. However, borrowers seeking a Tarun Plus loan above ₹10 lakh must have successfully repaid an earlier Tarun loan. Ordinary crop farming is not covered, but allied activities such as dairy and fisheries are eligible.

You do not need to apply to NCGTC for the guarantee. Instead, you apply for a Mudra loan through a bank, NBFC or MFI. The lender then approaches NCGTC to obtain guarantee cover for eligible loans.

If you need assistance, you can contact your lender or approach the NCGTC helpdesk in Mumbai. You can find its office address, email address and telephone numbers in the contact section below.

Entrepreneurs who want to understand the loan scheme can read our guide to the Pradhan Mantri Mudra Yojana (PMMY). Women and Scheduled Caste or Scheduled Tribe entrepreneurs seeking larger business loans can also explore the Stand-Up India Scheme. Recognised startup founders can learn about the Credit Guarantee Scheme for Startups.

Young entrepreneurs looking for financial assistance with a subsidy can explore the Prime Minister’s Employment Generation Programme (PMEGP). Startups seeking initial funding can also check the Startup India Seed Fund Scheme.

Micro entrepreneurs, small shopkeepers, Self Help Groups and Jan Dhan account holders looking for other loan, credit and business assistance programmes can explore our list of Central Government Welfare and Popular Schemes.

Latest Updates on Credit Guarantee Fund for Micro Units (CGFMU)

• Cabinet Approval: On 11 November 2026, the Union Cabinet approved the continuation of CGFMU until 31 March 2031. The extension covers the period from FY 2026-27 to FY 2030-31, in line with the Sixteenth Finance Commission cycle.
• Revised Guarantee Cover: The announcement links the guarantee cover to the amount disbursed for working capital limits and the outstanding amount for term loans. However, it does not specify the revised coverage percentage or first-loss requirement. Lenders and borrowers should check the updated operating guidelines for these details.
• Stand-Up India Scheme Extended: The Cabinet also approved the continuation of the Stand-Up India Scheme until 31 March 2031 on the same day. This means the credit support arrangements under both schemes are set to continue until the same date.
• Other NCGTC Schemes: The National Credit Guarantee Trustee Company Limited (NCGTC) lists 20 credit guarantee schemes on its website. Its Emergency Credit Line Guarantee Scheme 5.0 also began on 8 May 2026.
• What to Watch Next: Keep an eye on the updated operating guidelines, revised NCGTC FAQs and the list of lenders continuing their participation in the fund. These details will help clarify how the new guarantee terms work.
• Prepare Before Applying: Keep your business documents and, if you plan to seek a Tarun Plus loan, proof of successful repayment of your earlier Tarun loan ready. Also, confirm with your lender whether it is registered with NCGTC and has the required guarantee arrangements in place.

Benefits Provided to Eligible Beneficiaries

Small business owners often struggle to get loans because they cannot provide property or other collateral as security. The Credit Guarantee Fund for Micro Units (CGFMU) helps address this problem by providing guarantee cover to lenders against eligible loans. This encourages banks and other financial institutions to support micro businesses with less risk. The following benefits reflect the scheme details and changes announced on 11 November 2026.

What It Does for You as a Borrower

• Access to collateral-free loans under the Pradhan Mantri Mudra Yojana
• Mudra loans of up to ₹20 lakh under the Shishu, Kishor, Tarun and Tarun Plus categories
• Tarun Plus loans of above ₹10 lakh and up to ₹20 lakh for borrowers who have successfully repaid an earlier Tarun loan
• Overdraft facility of up to ₹10,000 for eligible Jan Dhan account holders
• Collateral-free loans of above ₹10 lakh and up to ₹20 lakh for eligible Self Help Groups
• More opportunities to access formal credit for starting or expanding a micro business

What It Does for the Lender

• Reduces the lender’s risk by covering a specified share of eligible loan defaults
• Allows lenders to cover an entire portfolio of eligible loans instead of applying for each loan separately
• Provides guarantee cover for a base year and three additional years, subject to annual renewal and applicable conditions
• Allows lenders to manage guarantee requests, renewals and claims through NCGTC’s online platform, SURGE

Old and New Terms at a Glance

A Simple Example of the Earlier Loss Sharing

NCGTC provides an example of the earlier guarantee arrangement for micro loans sanctioned from FY 2020-21. Suppose a lender has a loan portfolio of ₹1,000, out of which ₹100 becomes a default. The lender bears the first loss of 3% of the default amount, which comes to ₹3. The fund then covers 75% of the remaining ₹97, amounting to ₹72.75. The new loss-sharing arrangement follows a different calculation based on the amount disbursed and outstanding. Its detailed impact should be confirmed with the lender or NCGTC.

The Size of the Fund and Its Reach

• ₹5,000 crore corpus approved by the Cabinet to support the guarantee fund
• Expected support for ₹12.6 lakh crore in Mudra loans over the next five years
• More than 60.36 crore Mudra loans, worth approximately ₹43.34 lakh crore, sanctioned up to September 2026
• The fund has supported eligible Mudra lending since its establishment in January 2016

How the Lender Pays for the Guarantee

• The lender pays the guarantee fee to NCGTC. The revised annual fee for micro loans is 0.75%.
• For the first year, the lender submits a Management Certificate within 7 days after the quarter ends and pays the fee after receiving NCGTC’s demand note.
• For subsequent years, the lender submits details of active loans by 31 July and pays the annual fee by 31 August or the date specified by NCGTC.
• The lender may recover the guarantee fee from the borrower at its discretion. Confirm any such charge before accepting the loan.

How the Scheme Helps You

• Get access to business credit without pledging your home or land as collateral.
• Build a repayment history with a formal lending institution.
• Access higher loan categories as your business grows and you meet the required conditions.
• Use the loan to support business activities and create employment opportunities.

Good to Know

• The guarantee protects the lender, not the borrower. The lender can reject an application if the business or repayment plan is not satisfactory.
• The guarantee does not waive your loan repayment obligation. You must repay the loan even if the lender receives a guarantee payment.
• The lender may pass the guarantee fee to you. The scheme also does not prescribe an interest rate ceiling, so check both charges before accepting the loan.
• Confirm the applicable guarantee coverage with your lender, particularly under the revised loss-sharing arrangement.
• Do not pay any agent to arrange a Mudra loan or guarantee cover.

Eligibility Conditions Required to be Fulfilled

The Credit Guarantee Fund for Micro Units (CGFMU) covers eligible loans provided to micro businesses, Self Help Groups and Jan Dhan account holders. The Union Cabinet extended the scheme for five years, until 31 March 2031. The extended scheme covers eligible loans sanctioned from FY 2026-27 to FY 2030-31. Both the borrower and the lending institution must meet the prescribed conditions.

Who Can Borrow

• New or existing micro units covered under the Pradhan Mantri Mudra Yojana or the Micro, Small and Medium Enterprises Act, 2006
• Micro units operating through a Joint Liability Group (JLG), individually or collectively
• Self Help Groups (SHGs), including groups under the National Rural Livelihood Mission and National Urban Livelihood Mission, for eligible loans
• Pradhan Mantri Jan Dhan Yojana account holders seeking an eligible overdraft
• Micro units without mandatory registration under the Micro, Small and Medium Enterprises Act

The Loans That Get the Guarantee

• Mudra loans of up to ₹20 lakh under the Shishu, Kishor, Tarun and Tarun Plus categories
• Loans above ₹10 lakh and up to ₹20 lakh under Tarun Plus, subject to successful repayment of an earlier Tarun loan
• Overdrafts of up to ₹10,000 against eligible Jan Dhan accounts
• Collateral-free SHG loans above ₹10 lakh and up to ₹20 lakh
• Loans without collateral, although group guarantees provided by SHG or JLG members are permitted

Which Activities Qualify

• Manufacturing, services and retail trade
• Agriculture-allied activities, including fisheries, beekeeping, poultry, livestock, dairy, grading and sorting, agri-clinics, and food and agro-processing
• Income-generating activities financed through eligible Jan Dhan overdrafts

Who Is Not Eligible

• Loans for purely agricultural activities, such as crop cultivation, or land improvement works involving canals, wells and irrigation
• Loans exceeding ₹20 lakh
• Tarun Plus loans above ₹10 lakh to borrowers who have not successfully repaid an earlier Tarun loan
• Loans secured by collateral, where the scheme requires collateral-free lending
• Loans already covered by another guarantee scheme against the same default
• Accounts already classified as Non-Performing Assets (NPAs) for fresh guarantee coverage, although existing guarantee cover may continue

Which Lenders Can Use the Guarantee

• Banks, microfinance institutions, non-banking financial companies and other financial intermediaries approved by the fund
• Lenders registered with the National Credit Guarantee Trustee Company Limited (NCGTC) through the prescribed undertaking and board resolution
• Lenders that assess the borrower’s business, documents and repayment capacity before approving the loan
• Lenders that independently decide whether to approve or reject a loan, as the guarantee does not make loan approval compulsory
• Lenders that follow the applicable scheme conditions, as no interest rate ceiling has been fixed under the fund

Check Before You Apply

• Make sure your business qualifies as a micro unit and your loan requirement does not exceed ₹20 lakh.
• Keep proof of successful repayment of an earlier Tarun loan if you are applying for a Tarun Plus loan.
• Check that your total Mudra loan amount falls within the applicable scheme limit.
• Confirm with your lender whether it is registered with NCGTC and will cover your loan under the guarantee.
• Do not pay any agent to arrange a Mudra loan or guarantee cover.

Documents Required to be Attached

To apply for a Mudra loan covered under the Credit Guarantee Fund for Micro Units (CGFMU), you need to submit the documents required by your bank or lending institution. The exact list may vary depending on your loan amount, business type and lender’s requirements.

Papers for Any Mudra Loan

• Aadhaar Card and PAN Card
• Proof of address, such as a voter identity card, driving licence, passport or utility bill
• Proof of your business, such as Udyam registration, a shop and establishment licence, trade licence or GST registration, if available, along with proof of the shop or workshop address
• A short business plan explaining what you sell or manufacture, how you plan to use the loan and your expected earnings
• Quotations or bills for the machinery, tools or stock you intend to purchase
• Bank statements for the last six to twelve months, if you already operate a business
• Recent photographs and bank account details for receiving the loan amount

Extra Papers by Type of Loan

• Tarun Plus loan, above ₹10 lakh and up to ₹20 lakh: Proof of an earlier Tarun loan and its successful repayment, such as the loan closure letter or account statement. Only eligible borrowers who have repaid an earlier Tarun loan can access this higher loan amount under the guarantee.
• Overdraft of up to ₹10,000 on a Jan Dhan account: Your Pradhan Mantri Jan Dhan Yojana account passbook and Aadhaar card, as the lender sanctions the overdraft against an eligible active account.
• Joint Liability Group: The group’s resolution, list of members and identity documents of every member
• Self Help Group loan, above ₹10 lakh and up to ₹20 lakh: The group’s resolution, savings and lending records, and members’ documents, as required by the lender

What You Do Not Need to Give

• A mortgage, guarantor or collateral when the lender covers your loan under this fund
• A separate application form for NCGTC, because only the lender can apply for the guarantee
• Registration under the Micro, Small and Medium Enterprises Act, as the NCGTC’s answers to frequently asked questions state that the fund does not require it

What the Lender Files With NCGTC

You do not have to submit these documents yourself. However, knowing about them will help you understand the formalities your lender must complete before using the guarantee.

• A signed undertaking and board resolution to register as a Member Lending Institution. Eligible institutions may include banks, microfinance institutions, non-banking financial companies and other lenders.
• A form containing the contact person’s details, after which NCGTC creates the lender’s login on its online platform, SURGE
• A Management Certificate within 7 days after the end of each quarter. NCGTC then issues a demand note for the guarantee fee within 3 days, and the lender must pay the fee within 3 days of receiving the note.
• Details of its active loans every year for the portfolios it wants to keep covered, along with annual renewal of the guarantee cover during the applicable period

Papers the Lender Files Later if Loans Go Bad

• An annual portfolio update showing the recovery made by the lender
• A claim file for eligible loans after the portfolio has completed one year, along with an auditor’s certificate confirming the claim amount, as specified in the scheme guidelines
• These records also matter to you because the lender tracks your loan repayments. Maintaining a good repayment record can help you establish creditworthiness when seeking a larger loan in the future.

How Beneficiaries Can Apply to Avail the Benefit of this Scheme

You do not apply to the National Credit Guarantee Trustee Company Limited (NCGTC) for the Credit Guarantee Fund for Micro Units (CGFMU). Instead, you apply for a Mudra loan through a bank or another eligible lender. The lender then approaches NCGTC to get guarantee cover for its eligible loans. Think of it like a school picnic: you give your form to the class teacher, and the teacher gets permission from the principal for the whole group. Here, the lender is your teacher, and NCGTC is the principal. Your job is to approach the lender with a good business plan and the required documents. The following methods explain how you can do this. For details about the loan scheme, read our guide to the Pradhan Mantri Mudra Yojana (PMMY).

Before You Start

Step 1: Check whether your business is a micro unit, such as a small shop, workshop, tailoring unit, food stall or allied agricultural activity. Ordinary crop farming is not covered.

Step 2: Decide how much money you need, up to ₹20 lakh, and identify the suitable loan category: Shishu, Kishor, Tarun or Tarun Plus.

Step 3: Keep your Aadhaar card, PAN card, address proof, business proof, bank statements, quotations and a short business plan ready. You can check the documents required section for the complete list.

Step 4: Read the official announcement on the Prime Minister’s website to understand the latest continuation of the fund.

Method 1: Go to a Bank Branch

Step 1: Find a nearby bank branch that provides Mudra loans. You can approach a public sector bank, private bank, regional rural bank or small finance bank.

Step 2: Meet the bank manager or loan officer and explain that you need a Mudra loan to start or expand your business.

Step 3: Collect the bank’s application form and fill it in with the correct personal and business details.

Step 4: Submit the required documents along with the form and collect an acknowledgement or receipt.

Step 5: Ask the bank in writing whether it will cover your loan under the credit guarantee fund so that you do not have to provide collateral.

Step 6: Answer the bank’s questions and provide any additional information it requests. The bank checks your business, documents and repayment capacity before making a decision.

Method 2: Go to a Non-Banking Financial Company or a Microfinance Institution

Step 1: Find a Non-Banking Financial Company (NBFC) or Microfinance Institution (MFI) in your area that provides Mudra loans.

Step 2: Ask whether the lender is registered with NCGTC and can obtain guarantee cover under the fund. Only an eligible registered lender can use this facility.

Step 3: Fill in the lender’s application form, submit your documents and collect a receipt.

Step 4: Ask for the interest rate and other charges in writing. The scheme does not set a fixed ceiling on the interest rate.

Method 3: Apply Online Through a Government Loan Portal

Step 1: Visit the Udyamimitra Portal or the JanSamarth portal to check the available online loan application facilities for Mudra loans.

Step 2: Register using your mobile number and log in to the portal.

Step 3: Select the Mudra loan option, if available, and enter your personal and business details as requested.

Step 4: Upload the required documents and submit your application.

Step 5: Save your application or reference number and wait for the lender’s response.

Step 6: If a lender contacts you, visit its branch with your original documents. The lender will still need to verify your details and business plan before approving the loan.

Method 4: Go Through a Group

Step 1: If you want to apply through a group, become a member of a Self Help Group (SHG) or Joint Liability Group (JLG) in your village or ward, if you are not already a member.

Step 2: Arrange a group meeting and pass a resolution stating that the group needs a loan and explaining how it will use the money.

Step 3: Submit the group resolution, member list and identity documents of the members to the lender.

Step 4: Remember that an eligible SHG can seek a collateral-free loan of above ₹10 lakh and up to ₹20 lakh. The group members’ mutual guarantee is not treated as collateral for this purpose.

Method 5: Ask for an Overdraft on Your Jan Dhan Account

Step 1: Check whether your Pradhan Mantri Jan Dhan Yojana (PMJDY) account is active and regularly used.

Step 2: Visit your bank and ask whether you are eligible for an overdraft of up to ₹10,000 under the scheme.

Step 3: Complete the bank’s application process and submit your Aadhaar card and passbook, along with any other documents requested.

Step 4: Use the overdraft for an income-generating activity and repay the amount according to the bank’s terms.

If You Want a Tarun Plus Loan

Step 1: Check whether you previously received a Tarun loan and successfully repaid it.

Step 2: Ask your earlier lender for a loan closure letter or account statement showing that you have repaid the loan.

Step 3: Approach an eligible lender and apply for a Tarun Plus loan of above ₹10 lakh and up to ₹20 lakh.

Step 4: Submit proof of your earlier Tarun loan repayment along with your business plan and other required documents. You must meet the previous Tarun loan repayment condition to qualify for Tarun Plus.

What Happens at the Lender

Step 1: The lender checks your business details, documents, credit history and ability to repay the loan.

Step 2: If the lender finds your business plan suitable and your application satisfactory, it may approve the loan.

Step 3: The lender may provide the loan without collateral if it covers the eligible loan under the fund.

Step 4: Read the loan agreement and other documents carefully before signing. Keep copies of all the papers for your records.

What the Lender Does With NCGTC

You do not need to complete these steps yourself. The lender handles the guarantee process with NCGTC, but knowing how it works can help you ask the right questions.

Step 1: The lender registers with NCGTC by submitting a signed undertaking and a resolution passed by its board.

Step 2: NCGTC provides the lender with login access to its online platform, SURGE.

Step 3: The lender submits a Management Certificate within 7 days after the end of each quarter. NCGTC then issues a demand note for the guarantee fee.

Step 4: The lender pays the applicable guarantee fee, which is 0.75% for micro loans under the revised terms.

Step 5: The lender renews the guarantee cover every year by submitting details of its active loans by 31 July and paying the annual fee by 31 August, or by another date specified by NCGTC. You can refer to the NCGTC FAQs on the guarantee scheme for these requirements.

After You Get the Loan

Step 1: Use the loan amount for the business purpose mentioned in your application.

Step 2: Pay your loan instalments on time. Remember, the guarantee protects the lender against eligible losses; it does not cancel your repayment responsibility.

Step 3: Keep your purchase bills, bank statements and sales records safe.

Step 4: If you face difficulty repaying the loan, contact your lender early instead of waiting until your account becomes overdue.

If the Lender Says No

Step 1: Ask the lender to explain the rejection in writing. It may refuse the loan if it finds your business plan unviable or your documents insufficient.

Step 2: Correct the problem, such as submitting a missing document or improving your business plan, and apply again if possible.

Step 3: You can also approach another bank branch or an eligible lender for a fresh assessment.

Step 4: Remember that you may have more than one Mudra loan, subject to the applicable scheme conditions and the overall loan limits.

If You Need Help

Step 1: Contact your bank manager or the loan officer handling your application.

Step 2: If you need clarification about the guarantee arrangement, contact NCGTC through the email address or phone number listed on its official contact page.

Important: You cannot apply directly to NCGTC for this guarantee. The lender decides whether to approve your loan and handles the guarantee process with NCGTC. No agent can arrange guaranteed approval, so do not pay anyone for this purpose. Also, ask your lender in writing whether it will charge you any guarantee-related fee.

Which Mudra Loans Are Covered Under the Credit Guarantee Fund for Micro Units (CGFMU)?

The Credit Guarantee Fund for Micro Units (CGFMU) covers eligible Mudra loans across the Shishu, Kishor, Tarun and Tarun Plus categories. It also covers certain Jan Dhan overdrafts and Self Help Group loans. The table below explains the loan limits and the conditions for each category.

In simple terms, eligible borrowers can access guarantee-backed loans under Shishu, Kishor and Tarun. They can also move to Tarun Plus after successfully repaying an earlier Tarun loan. However, guarantee cover is not automatic for every loan. The lender must meet NCGTC’s requirements and obtain cover for the eligible loan.

Important Links Available of the Scheme

• Cabinet Approval for Continuation of CGFMU Till 31 March 2031
• CGFMU FAQs: Guarantee Cover, Fees and Claims NCGTC (PDF)
• National Credit Guarantee Trustee Company Limited (NCGTC) Official Website
• NCGTC Contact Details and Grievance Support
• Pradhan Mantri Mudra Yojana (PMMY) Official MUDRA Website
• Udyamimitra Portal for Mudra Loan Application
• JanSamarth Portal Government Credit-Linked Loan Schemes

Contact Details in Case of Help Needed

• Office: National Credit Guarantee Trustee Company Limited (NCGTC), Department of Financial Services, Ministry of Finance, 1410, 14th Floor, Parinee Crescenzo, Plot No. C-38 and C-39, G-Block, Bandra Kurla Complex, Bandra East, Mumbai, Maharashtra – 400051
• CGFMU Helpdesk Email: cgfmu@ncgtc.in
• CGFMU Helpdesk Phone: 022-69035626 and 022-69035612
• Board Number: 022-69035600
• General Email: info@ncgtc.in
• Grievance Email: grievance@ncgtc.in
• Your Lender: The manager of the bank branch, or the staff of the non banking finance company or microfinance institution where you apply, who decides on your loan and who asks NCGTC for the guarantee

Frequently Asked Questions (FAQs)

Tabassum

Tabassum is a government schemes researcher and writer with 5 years of experience tracking Central and State welfare scheme programmes across India. She has covered 500+ schemes spanning agriculture, women welfare, education, and housing, helping lakhs of beneficiaries understand their entitlements in simple language.