Centre Extends Mudra and Stand-Up India Schemes Until 2031

The government has extended two major credit support programmes for another five years. The Union Cabinet has approved the continuation of the Credit Guarantee Fund for Micro Units and the Stand-Up India Scheme until March 31, 2031.

The decisions aim to improve access to formal finance for small businesses and entrepreneurs. They also focus on women and entrepreneurs from Scheduled Castes and Scheduled Tribes.

The Cabinet has approved a ₹5,000 crore corpus for the Mudra-linked guarantee fund. It has also allocated ₹4,111 crore for the Stand-Up India credit guarantee framework.

The two measures are expected to support substantial lending over the next five years. They also introduce changes to guarantee fees to encourage financial institutions to extend more credit.

Mudra Credit Guarantee Fund Gets Five-Year Extension

The Credit Guarantee Fund for Micro Units (CGFMU) supports lending institutions that provide loans under the Pradhan Mantri Mudra Yojana (PMMY).

It protects eligible lenders against specified loan default risks. This encourages banks and other financial institutions to extend credit to micro businesses.

The Cabinet has approved a ₹5,000 crore corpus to continue the fund until March 2031.

The government expects the arrangement to facilitate ₹12.6 lakh crore in Mudra loans over the next five years.

Since the launch of PMMY, lenders have sanctioned more than 60.36 crore loans. Their combined value reached ₹43.34 lakh crore as of September 2026.

These figures demonstrate the scale of the programme. They also highlight the importance of credit guarantees in expanding lending to smaller enterprises.

Lower Guarantee Fees Could Support Lending

One major change involves the annual guarantee fee under the Mudra-linked fund.

The government has reduced the fee from 1% to 0.75% per year.

This change could lower the guarantee-related cost for participating lenders. It may also encourage financial institutions to extend more loans to eligible micro enterprises.

The revised framework will cover eligible Mudra loans of up to ₹20 lakh.

It will also cover overdrafts of up to ₹10,000 under Pradhan Mantri Jan Dhan Yojana accounts. Specified self-help group loan portfolios between ₹10 lakh and ₹20 lakh will remain eligible.

The government has also revised how guarantee coverage is calculated.

For working capital facilities, coverage will be linked to the amount disbursed. For term loans, it will be linked to the outstanding amount.

This approach aims to reflect the lender’s actual exposure to credit risk.

The existing fee structure for self-help groups will remain unchanged. Their guarantee fee will continue at 0.25% in the first year and 0.50% in subsequent years.

Stand-Up India Targets 2.5 Lakh More Entrepreneurs

The Cabinet has also extended the Stand-Up India Scheme until March 31, 2031.

The programme aims to support at least 2.5 lakh additional entrepreneurs over the next five years.

Its primary beneficiaries are women and entrepreneurs from Scheduled Castes and Scheduled Tribes.

Since its launch in April 2016, the scheme has facilitated loans for more than 2.75 lakh entrepreneurs from these groups.

The latest extension includes a credit guarantee corpus of ₹4,111 crore.

The government aims to improve access to institutional finance for people who may face barriers when setting up new businesses.

Loan Support of Up to ₹1 Crore

Eligible Stand-Up India borrowers can access loans above ₹10 lakh and up to ₹1 crore.

The finance is intended for setting up new, or greenfield, enterprises.

Eligible business activities include:

• Manufacturing
• Services
• Trading
• Agriculture-related activities

Borrowers can receive either a term loan or a composite loan. A composite facility combines working capital and term finance.

The loan can cover up to 85% of the project cost. The scheme also provides credit guarantee coverage of 85% of the loan amount.

The standard guarantee fee has been set at 0.50%.

The framework aims to reduce lending risks while improving access to formal finance for eligible entrepreneurs.

Why These Extensions Matter for Small Businesses

Access to finance remains a major challenge for micro and small businesses.

Many new entrepreneurs lack sufficient collateral or an established credit history. This can make it difficult to secure loans through conventional banking channels.

Credit guarantee programmes help address this gap. They provide protection to lenders against eligible default risks.

This can encourage financial institutions to consider borrowers who may otherwise struggle to obtain formal credit.

The Mudra programme focuses on micro enterprises. Stand-Up India specifically supports women and SC/ST entrepreneurs establishing new businesses.

Both programmes therefore serve different but complementary objectives.

The extensions could help entrepreneurs access funds for equipment, working capital, business premises and expansion.

However, loan availability alone cannot guarantee business success. Enterprises also need market access, financial management skills, reliable infrastructure and sustained demand.

Implementation and Credit Risk Remain Important

The expanded programmes will require effective implementation by banks and other lending institutions.

Lenders must assess borrowers carefully and monitor repayment performance. Credit guarantees do not eliminate the need for responsible underwriting.

The government must also ensure that eligible entrepreneurs understand the application process. Awareness and access remain important, particularly in smaller towns and rural areas.

Another challenge is ensuring that loans support productive business activity. Credit should help establish and expand enterprises rather than create unsustainable debt.

The revised guarantee fees may improve lender participation. Their actual impact will depend on how financial institutions respond.

A Longer Credit Support Framework for Entrepreneurs

The five-year extension gives lenders and entrepreneurs a longer policy horizon.

The Mudra-linked guarantee fund is expected to facilitate ₹12.6 lakh crore in loans. Stand-Up India aims to reach another 2.5 lakh entrepreneurs.

Together, the measures represent a continued government effort to expand institutional finance and encourage enterprise creation.

The next stage will depend on the quality of lending and the businesses created through these programmes. Strong implementation could improve access to capital, support employment and encourage more formal economic activity.

The government’s challenge will be to convert large credit targets into sustainable enterprises. The success of both schemes will ultimately depend on repayment quality, business survival and the ability of new entrepreneurs to generate lasting income.