The Union Cabinet on Wednesday approved the continuation of two credit guarantee schemes for five years, allocating ₹4,111 crore for the Stand-Up India fund and ₹5,000 crore for the Micro Units fund under the Pradhan Mantri Mudra Yojana (PMMY), aimed at expanding collateral-free credit to women, SC/ST and micro entrepreneurs, according to an official release.
According to the government, the Credit Guarantee Fund for Stand-Up India will guarantee loans above ₹10 lakh and up to ₹1 crore for women and SC/ST entrepreneurs setting up greenfield enterprises.
The scheme targets an average of two loans per bank branch—one to a woman entrepreneur and one to an SC/ST entrepreneur. The guarantee fee will be 0.50% annually, with no additional risk premium, while the guarantee cover will be increased to 85% across loan sizes.
Borrowers will also receive support through the loan process and business cycle.
Meanwhile, the PMMY Credit Guarantee Fund is expected to support Mudra loans worth ₹12.60 lakh crore. It will cover PMMY loans of up to ₹20 lakh, overdrafts of up to ₹10,000 under the Pradhan Mantri Jan Dhan Yojana and self-help group loans of ₹10-20 lakh, all without collateral.
The annual guarantee fee will be reduced from 1% to 0.75%, while the government plans to strengthen the claim process for lenders to improve credit flow to micro entrepreneurs.