Cabinet extends Mudra credit guarantee scheme through 2031

The government has extended its flagship micro-credit guarantee initiative, ensuring continued support for small entrepreneurs through the end of this decade. The cabinet decision allocates ₹5,000 crore to the Credit Guarantee Fund for Micro Units, which underpins the Pradhan Mantri Mudra Yojana (PMMY) scheme.

The extended guarantee framework is designed to mobilize over ₹12.6 trillion in loans across the micro-credit sector, addressing a persistent funding gap for self-employed individuals and small business proprietors. The scheme provides collateral-free lending to borrowers who lack traditional security arrangements, reducing risk for lending institutions.

The Mudra scheme has emerged as a key pillar of the government's efforts to promote self-employment and entrepreneurship in India's informal economy. By guaranteeing loans against potential defaults, the scheme has enabled banks and non-bank financial institutions to extend credit more aggressively to underserved borrower segments.

The extension through March 2031 signals the government's commitment to sustaining micro-credit access as the economy continues its recovery and expansion. Officials indicated that the scheme's rollover would complement broader initiatives aimed at formalizing India's vast informal sector and supporting job creation at the grassroots level.