Cabinet extends Mudra and Stand-Up India loan support through March 2031
Where it stands
The Union Cabinet approved continued guarantee support for Mudra loans and Stand-Up India on 11 November 2026. Both will run through 31 March 2031. A credit guarantee covers part of a lender’s loss if an eligible borrower defaults. It helps lenders offer business credit while borrowers remain responsible for repayment. The Mudra guarantee fund will have a ₹5,000 crore corpus. Its annual guarantee fee falls from 1% to 0.75% for the standard category. This reduces the cost of guarantee protection; it does not set a uniform interest rate for every borrower. The government expects the fund to support ₹12.6 lakh crore in lending over five years. Stand-Up India will receive a ₹4,111 crore guarantee corpus. It supports eligible women and Scheduled Caste or Scheduled Tribe entrepreneurs starting new enterprises. Loans are above ₹10 lakh and up to ₹1 crore. Guarantee coverage is 85% of the loan, with a standard fee of 0.50%. The government targets another 2.5 lakh entrepreneurs. These are different borrowing routes, with distinct eligibility rules.
Background
A small business may need a loan to buy equipment or pay everyday operating costs. A lender must assess whether the business can repay. A new enterprise may have little borrowing history, making this assessment harder. A guarantee fund shares some of the lender’s risk. If a covered loan defaults, the fund can meet the protected share under its rules. The corpus is the pool backing these guarantees. Because it covers losses rather than paying every loan upfront, it can support lending greater than its own size. Mudra supports eligible micro-business borrowing through participating lenders. Stand-Up India focuses on new enterprises set up by eligible women and SC or ST entrepreneurs. Its eligible activities include manufacturing, services, trading and agriculture-related businesses. An entrepreneur therefore needs to identify the suitable scheme before applying to a lender. The Cabinet decisions continue these forms of support and revise their guarantee arrangements. They give lenders and prospective borrowers a longer period in which the schemes operate. Loan approval still involves the lender’s assessment and the applicable scheme conditions.
How it developed
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11 November 2026How it started
Two guarantee arrangements receive five-year continuation
The Cabinet continued the Credit Guarantee Fund for Micro Units for 2026–27 through 2030–31. It also approved Stand-Up India’s continuation until 31 March 2031. The first decision changes the standard annual guarantee fee and provides the fund’s corpus. The second specifies guarantee protection and provides a separate corpus for eligible new enterprises. For example, an eligible woman opening her first manufacturing enterprise can seek a Stand-Up India loan within its prescribed range. The lender assesses the proposal, and the guarantee covers the approved share of risk. The entrepreneur uses the loan for the business and repays it under the loan agreement.
Why it matters for UPSC
For GS3, explain how credit guarantees can improve access to business finance. Distinguish the guarantee corpus, lending supported, guarantee fee and borrower’s interest rate. Connect Stand-Up India with inclusive entrepreneurship.
Key terms
Sources (3)
- Government of India / PIB · official · Continuation of the Credit Guarantee Fund for Micro Units12 Nov, 1:41 pm
- Government of India / PIB · official · Stand-Up India extended to March 203112 Nov, 1:41 pm
- Business Standard / PTI · Stand-Up India extension and guarantee corpus12 Nov, 1:41 pm