Major decision by the government regarding the Mudra Yojana: the loan scheme will continue until 2031; here is who will benefit..

The Central Government has taken a significant decision regarding the Pradhan Mantri Mudra Yojana (PMMY). The government has approved the continuation of the Credit Guarantee Fund for Micro Units (CGFMU)—a fund established for small-scale enterprises—until March 2031. This initiative will facilitate the disbursement of loans amounting to ₹12.6 lakh crore under the Mudra Yojana over the next five years. The decision is expected to benefit small business owners, new entrepreneurs, and young individuals planning to launch their own businesses.

The proposal was approved during a Union Cabinet meeting held on Wednesday, chaired by Prime Minister Narendra Modi. The government has allocated a budget of ₹5,000 crore for this purpose. This arrangement will remain in effect from the financial year 2026-27 through 2030-31, providing a credit guarantee for all eligible loans granted under the Mudra Yojana.

What is the Credit Guarantee Fund, and how does it work?
Minister of Information and Broadcasting Ashwini Vaishnaw explained that this fund provides protection to banks and other lending institutions against the risk of loan defaults. The guarantee is extended through the National Credit Guarantee Trustee Company Limited (NCGTC). In simpler terms, if an individual takes a loan under the Mudra Yojana to start a business but is unable to repay it for any reason, the Credit Guarantee Fund—in accordance with established rules—compensates the bank for a portion of the loss incurred. This encourages banks to extend credit to small business owners.

Over ₹43 lakh crore in loans sanctioned to date
According to the government, the Credit Guarantee Fund was launched in January 2016. Since the inception of the Pradhan Mantri Mudra Yojana, banks and other financial institutions have sanctioned more than 60.36 crore loans, with the total value exceeding ₹43.34 lakh crore. Loans under this scheme are provided without the requirement of any collateral or assets as security. This enables even those who previously struggled to secure financing to obtain bank loans for their businesses.

Who is eligible for assistance, and for what amount?
Under the loan guarantee fund, the Mudra Yojana covers loans of up to ₹20 lakh. Additionally, account holders under the Pradhan Mantri Jan Dhan Yojana can access an overdraft facility of up to ₹10,000, while self-help groups can receive guarantees—subject to specific rules—on loans ranging from ₹10 lakh to ₹20 lakh.

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