Finance Ministry Declares Joint Liability Group Micro Enterprises as Eligible Borrowers under Credit Guarantee Fund Scheme [Read Notification]

The Finance Ministry has announced amendments to the Credit Guarantee Fund Scheme for Micro Units ( CGFMU ) through a partial modification of previous notifications, bringing updates to support microfinance and entrepreneurial growth under the Pradhan Mantri MUDRA Yojana (PMMY).

The revised scheme, effective from October 24, 2024, aims to expand access to collateral-free loans for micro-entrepreneurs, particularly under the 'Shishu,' 'Kishor,' 'Tarun,' and the newly introduced 'Tarun Plus' categories, ensuring more comprehensive financial assistance for different stages of business development.

PARA 2(xi) of Chapter I of Notification number S.O. 1443(E) dated the 18th April, 2016

As per the amendments, the definition of “Micro Loan” in Paragraph 2(xi) of of Chapter I Notification S.O. 1443(E) dated on 18th April, 2016, it has been updated to include collateral-free loans up to Rs. 20 lakh, extended by lending institutions under the guidelines of the CGFMU. These loans, supported by MUDRA Ltd., have been segmented to address varying needs: 'Shishu' covers loans up to Rs. 50,000; 'Kishor' includes loans above Rs. 50,000 and up to Rs. 5 lakh; 'Tarun' covers loans above Rs. 5 lakh and up to Rs. 10 lakh; and 'Tarun Plus,' introduced for entrepreneurs who have successfully repaid previous loans, covers loans above Rs. 10 lakh and up to Rs. 20 lakh. Additionally, an overdraft facility of Rs. 10,000 under Pradhan Mantri Jan Dhan Yojana (PMJDY) is now eligible for coverage under the CGFMU.

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PARA 2(xii) of Chapter II of Notification number S.O. 1443(E) dated the 18th April, 2016

In Paragraph 2(xii) of Chapter II of Notification number S.O. 1443(E) dated the 18th April, 2016, the amendment redefines "Eligible Borrower" to encompass both new and existing micro units, including enterprises set up under the Joint Liability Group (JLG) framework. The eligibility extends to those in any PMMY-covered sector or as defined under the MSMED Act, 2006, with a credit requirement up to Rs. 20 lakh. This modification also broadens eligibility to include Self-Help Groups (SHGs) seeking loans between Rs. 10 lakh and Rs. 20 lakh.

The amended paragraph 2(xii) of chapter II states as follows:

"xii. Eligible borrower" means new or existing micro unit / enterprise, including micro unit/enterprise set up under Joint Liability Group (JLG) framework, individually or jointly (irrespective of the availability of guarantee under JLG), falling under any sector covered under PMMY or as defined in the MSMED Act, 2006 (as amended from time to time), who meets eligibility criteria prescribed by the Fund and whose credit requirement does not exceed the specified limit under PMMY. Specified limit of the loan shall be Rs.20 lakh as defined above or such other amount as may be decided by the Fund from time to time. Further, Overdraft loan amount of Rs.10,000/- sanctioned under PMJDY accounts shall also be eligible to be covered under Credit guarantee Fund. Eligible borrower would also mean Self Help Groups who meet eligibility criteria prescribed by the Fund and whose loan amount is above Rs.10 lakh and upto Rs.20 lakh.

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The old paragraph 2(xii) of chapter II states as follows:

“‘xii. “Eligible borrower” means new or existing micro unit / enterprise falling under any sector covered under PMMY or as defined in the MSMED Act, 2006 (as amended from time to time), who meets eligibility criteria prescribed by the Fund and whose credit requirement does not exceed the specified limit under PMMY. Specified limit of the loan shall be Rs.10 lakh or such other amount as may be decided by the Fund from time to time. Further, Overdraft loan amount of Rs.10,000/- sanctioned under PMJDY accounts shall also be eligible to be covered under Credit guarantee Fund. Eligible borrower would also mean Self Help Groups who meet eligibility criteria prescribed by the Fund and whose loan amount is above Rs.10 lakh and upto Rs.20 lakh.’”

To Read the full text of the Order CLICK HERE

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