Modi Cabinet extends CGFMU to facilitate ₹12.6 lakh crore loans until March 2031
GS3Economy · S&T · Environment · Security· Industry, investment & MSMEs· Prelims + Mains·
Credit guarantee mechanisms for micro-enterprises: a key GS3 topic on financial inclusion and industrial growth.
Why in news
The Union Cabinet approved the extension of the Credit Guarantee Fund for Micro Units (CGFMU) until March 2031 to facilitate ₹12.6 lakh crore in loans.
Background
The CGFMU scheme provides credit guarantee coverage to lending institutions to mitigate default risks for micro units. It operates through a corpus of ₹5,000 crore to facilitate a total loan amount of ₹12.6 lakh crore.
Facts for Prelims
- SchemeCGFMU: Credit Guarantee Fund for Micro Units
- BodyNational Credit Guarantee Trustee Company Limited: The body providing credit guarantee coverage
- FactCGFMU Corpus: ₹5,000 crore
- FactTarget Loan Facilitation: ₹12.6 lakh crore by March 2031
Prelims practice question
What is the corpus amount allocated for the Credit Guarantee Fund for Micro Units (CGFMU)?
- (a)₹7,500 crore
- (b)₹10,000 crore
- (c)₹5,000 crore
- (d)₹2,500 crore
Show answer
Answer: (c) ₹5,000 crore — The note specifies that the CGFMU operates through a corpus of ₹5,000 crore.
For Mains
Q. Discuss how credit guarantee schemes can bridge the credit gap for micro-enterprises and contribute to inclusive industrial growth in India.
Dimensions to cover in your answer
- Risk mitigation: Reducing collateral requirements for micro-units to encourage formal credit uptake
- Institutional framework: Role of the National Credit Guarantee Trustee Company in managing default risks
- Financial inclusion: Addressing the high-risk perception of micro-enterprises by lending institutions
Keywords: Credit Guarantee · Micro-enterprises · Risk Mitigation · Financial Inclusion · Capital Formation
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