The Union Cabinet has approved more than ₹9,000 crore in funding to continue two major government-backed credit support programmes for small businesses and entrepreneurs. The decision covers the Pradhan Mantri MUDRA Yojana (PMMY) and the Stand-Up India scheme, both of which have been extended for another five years until March 31, 2031.
The approved funding includes a ₹5,000 crore corpus for the Credit Guarantee Fund for Micro Units (CGFMU), which supports lending under the Mudra scheme, and ₹4,111 crore for the extended Stand-Up India programme. The measures are intended to improve access to institutional finance for micro enterprises and encourage entrepreneurship among women and Scheduled Caste (SC) and Scheduled Tribe (ST) communities.
Government Approves ₹5,000 Crore for Mudra Credit Guarantee Fund
Under the Cabinet decision announced on November 11, 2026, the government has approved a ₹5,000 crore corpus for the continuation of the Credit Guarantee Fund for Micro Units for another five years.
The fund supports the Pradhan Mantri MUDRA Yojana by providing credit guarantees to eligible lending institutions against the risk of defaults on covered loans. This mechanism is designed to encourage banks and other financial institutions to extend collateral-free credit to micro and small businesses.
The government expects the extended guarantee facility to facilitate Mudra loans worth approximately ₹12.6 lakh crore between FY2026-27 and FY2030-31.
One of the key changes is a reduction in the annual guarantee fee from 1% to 0.75%. The lower fee is intended to reduce the cost associated with the guarantee mechanism and support the flow of credit to eligible borrowers.
The revised framework will provide guarantee coverage for eligible Mudra loans of up to ₹20 lakh. It will also cover overdraft facilities of up to ₹10,000 under the Pradhan Mantri Jan Dhan Yojana and certain loans extended to self-help groups.
For self-help group loans, the existing guarantee fee structure will remain unchanged at 0.25% for the first year and 0.50% in subsequent years.
Mudra Scheme Has Sanctioned More Than 60 Crore Loans
The latest government figures highlight the scale of the Mudra programme since its launch in April 2015.
As of September 2026, lending institutions had sanctioned more than 60.36 crore loans worth ₹43.34 lakh crore under the scheme.
The programme was introduced to improve access to institutional finance for non-corporate, non-farm micro and small enterprises. It supports businesses operating across manufacturing, trading, services and activities allied to agriculture.
Mudra loans are organised into different categories based on the funding requirements and growth stage of businesses:
| Loan Category | Loan Amount |
|---|---|
| Shishu | Up to ₹50,000 |
| Kishor | Above ₹50,000 to ₹5 lakh |
| Tarun | Above ₹5 lakh to ₹10 lakh |
| Tarun Plus | Above ₹10 lakh to ₹20 lakh |
Tarun Plus is intended for eligible borrowers who have successfully repaid previous Tarun loans.
The programme has become an important part of India’s small-business credit ecosystem, particularly for entrepreneurs who may have limited access to conventional financing. However, a credit guarantee does not mean that every applicant automatically receives a loan. Lending institutions continue to assess applications based on eligibility, repayment capacity and applicable lending requirements.
Stand-Up India Gets ₹4,111 Crore to Support 2.5 Lakh Entrepreneurs
The Cabinet has also approved ₹4,111 crore for the continuation of the Stand-Up India scheme until March 31, 2031.
The programme aims to provide financial assistance to at least 2.5 lakh additional entrepreneurs over the next five years, focusing on women and members of Scheduled Caste and Scheduled Tribe communities.
Launched in April 2016, Stand-Up India was designed to support people from these communities in establishing new businesses, particularly where access to formal credit has traditionally been limited.
According to the government, the scheme has already facilitated loans for more than 2.75 lakh women and SC/ST entrepreneurs since its launch.
Under the extended programme, eligible borrowers can access loans exceeding ₹10 lakh and going up to ₹1 crore to establish greenfield enterprises. These are new business ventures rather than expansions of existing businesses.
The loans can be structured as term loans or composite loans combining working capital and term financing. Eligible projects can receive financing of up to 85% of the project cost, subject to the scheme’s conditions.
The programme covers businesses in several sectors, including:
- Manufacturing
- Services
- Trading
- Agriculture-allied activities
The government has also standardised the guarantee fee at 0.50%, with credit guarantee coverage set at 85% of the loan amount. This is intended to reduce the risk faced by lending institutions while supporting access to financing for eligible entrepreneurs.
Key Differences Between the Two Schemes
Although both programmes aim to expand access to formal credit, they serve different borrower groups and business requirements.
| Feature | Mudra Yojana | Stand-Up India |
|---|---|---|
| Primary beneficiaries | Eligible micro and small businesses | Women and SC/ST entrepreneurs |
| Loan range | Up to ₹20 lakh | Above ₹10 lakh to ₹1 crore |
| Main objective | Support micro-business financing | Encourage new greenfield enterprises |
| Guarantee support | Through CGFMU | Through the Stand-Up India framework |
| Extension | Until March 31, 2031 | Until March 31, 2031 |
| Newly approved corpus | ₹5,000 crore | ₹4,111 crore |
The combined approval of ₹9,111 crore reflects the government’s continued focus on using credit guarantees to encourage institutional lending to smaller businesses and entrepreneurs.
How the Extended Schemes Could Affect Small Businesses
Access to finance remains an important challenge for micro enterprises, particularly businesses that lack substantial assets, established credit histories or the financial records often required for conventional loans.
The Mudra guarantee mechanism is intended to address part of this challenge by reducing the potential losses faced by lenders when eligible borrowers default. The lower guarantee fee could also help improve the economics of lending under the programme.
For women and SC/ST entrepreneurs, the Stand-Up India extension provides a separate financing channel for establishing new businesses. Its loan range is designed for projects that require more capital than the smaller loans typically associated with Mudra.
The additional target of 2.5 lakh entrepreneurs could expand opportunities in manufacturing, services, trading and agriculture-related businesses. It may also support local employment if the financed enterprises become operational and expand their activities.
However, the actual impact will depend on how effectively banks and other institutions process applications, assess viable projects and disburse loans. Access to finance alone cannot guarantee business success; entrepreneurs also need market demand, operational capabilities and sustainable repayment plans.
The Bigger Picture
The latest Cabinet approval comes as India continues to expand its formal credit ecosystem for small businesses. Micro and small enterprises play an important role in employment generation, local manufacturing, services and economic activity across smaller cities and rural areas.
The two schemes address different parts of this financing landscape. Mudra focuses on improving credit access for eligible micro enterprises, while Stand-Up India targets entrepreneurs from communities that have historically faced barriers to institutional financing.
The ₹9,111 crore approval is a credit guarantee commitment rather than a direct distribution of the entire amount as loans to individual businesses. Its broader purpose is to support a much larger volume of lending by reducing the risk exposure of participating financial institutions.
The government’s expectation that the Mudra guarantee facility will support ₹12.6 lakh crore in loans over five years illustrates the potential scale of this approach. The outcome will depend on loan demand, lender participation, borrower eligibility and repayment performance.
Looking Ahead
Both schemes will continue until March 31, 2031, giving banks and eligible borrowers a longer policy horizon for accessing and providing credit. The reduction in the Mudra guarantee fee and the standardised guarantee fee under Stand-Up India are among the changes expected to support lending under the extended frameworks.
For aspiring entrepreneurs, the next important step will be understanding the eligibility conditions, preparing viable business proposals and approaching participating lending institutions. The effectiveness of the extensions will ultimately be measured by how many businesses secure financing, remain operational and create sustainable economic opportunities.
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