Mudra loan guarantee fee cut to 0.75% as Cabinet extends cover and Stand-Up India to March 2031

The annual fee for guaranteeing Mudra loans to small businesses falls by a quarter, from 1% to 0.75%, after the Union Cabinet on Wednesday, 11 November, extended the Credit Guarantee Fund for Micro Units (CGFMU) by five years to 31 March 2031. The Cabinet also kept Stand-Up India, which funds new businesses started by women and Scheduled Caste and Scheduled Tribe entrepreneurs, running to the same date.

The guarantee fund, set up in January 2016, gets Rs 5,000 crore as its corpus. Working through the National Credit Guarantee Trustee Company, it shields lenders against default on three kinds of credit: loans of up to Rs 20 lakh to micro enterprises under the Pradhan Mantri Mudra Yojana, overdrafts of up to Rs 10,000 on Jan Dhan accounts, and loans to self-help groups with a portfolio of Rs 10 lakh to Rs 20 lakh. The finance ministry expects the extension to back Rs 12.6 lakh crore of Mudra lending between 2026-27 and 2030-31.

The fee cut in rupees

At the old rate, a year’s guarantee fee on Rs 10 lakh of Mudra credit came to Rs 10,000. At 0.75% it is Rs 7,500. Self-help group loans see no change: the fee stays at 0.25% for year one and 0.50% from the second year. Cover on a term loan is tied to the amount still outstanding, and on a working capital limit to the amount drawn, the ministry said.

By September 2026, lenders had sanctioned over 60.36 crore Mudra loans worth Rs 43.34 lakh crore since the scheme began. That is an average of about Rs 71,800 a loan.

Stand-Up India: above Rs 10 lakh, up to Rs 1 crore

Launched in April 2016, Stand-Up India has so far helped over 2.75 lakh borrowers, all of them women, SC or ST entrepreneurs. The Cabinet has set a target of at least 2.5 lakh more over the five years and set aside Rs 4,111 crore as a guarantee corpus. The loans go only to new, greenfield units in manufacturing, services, trading or farm-allied work.

A borrower can take a term loan, or a composite loan that mixes term and working capital, for any amount above Rs 10 lakh and up to Rs 1 crore, covering as much as 85% of what the project costs. For a Rs 40 lakh unit, that means a loan of up to Rs 34 lakh. The guarantee covers 85% of the loan, Rs 28.9 lakh in that case, at a standard fee of 0.50%.

The release names no start date for the lower Mudra fee and gives no state-wise figures. It says the guarantee scheme covers every Mudra loan given from 2026-27 to 2030-31.