Indian government extends credit guarantee schemes for micro entrepreneurs

The Union Cabinet of India approved a five-year extension for the Stand-Up India and Pradhan Mantri Mudra Yojana (PMMY) credit guarantee schemes.

These programs provide collateral-free loans to women, Scheduled Castes (SC), Scheduled Tribes (ST), and micro entrepreneurs to help them start and grow businesses. The government allocated ₹4,111 crore for the Stand-Up India fund and ₹5,000 crore for the Micro Units fund under the PMMY.

For Stand-Up India, the government will guarantee loans between ₹10 lakh and ₹1 crore for entrepreneurs starting new enterprises. The scheme aims to provide an average of two loans per bank branch, specifically targeting one woman entrepreneur and one SC/ST entrepreneur. The government increased the guarantee cover to 85% across all loan sizes and set the annual fee at 0.50%. The PMMY Credit Guarantee Fund is expected to support loans totaling ₹12.60 lakh crore.

This fund covers loans up to ₹20 lakh, overdrafts of up to ₹10,000 under the Pradhan Mantri Jan Dhan Yojana, and self-help group loans of ₹10 to ₹20 lakh. The government reduced the annual guarantee fee from 1% to 0.75% and plans to improve the claim process for lenders to increase the flow of credit to small businesses.