MUDRA loans to joint liability group micro enterprises now eligible for credit guarantee fund

The Pradhan Mantri MUDRA Yojana was launched by the Prime Minister in April 2015 for providing loans up to Rs 10 lakh to the non-corporate, non-farm small/micro enterprises.

The central government has made MUDRA loans given to so-called joint liability group micro enterprises eligible for the Credit Guarantee Fund for Micro Units, according to a tweet by the Finance Ministry’s Department of Financial Services.

“MUDRA loans for micro units/enterprises setup under Joint Liability Group (JLG) framework (individually or jointly) are now eligible for guarantee coverage under Credit Guarantee Fund for Micro Units (CGFMU),” the department said on March 24.

The Pradhan Mantri MUDRA Yojana was launched by the Prime Minister in April 2015 for providing loans up to Rs 10 lakh to the non-corporate, non-farm small/micro enterprises. These loans are classified as MUDRA loans and are given by commercial banks, regional rural banks, small finance banks, microfinance institutions and non-bank finance companies.

The government has in April 2016 launched the Credit Guarantee Fund for Micro Units aimed at guaranteeing loans up to the specified limit sanctioned by banks, NBFCs, microfinance institutions and other financial intermediaries engaged in providing credit facilities to eligible micro units.

Joint liability group is an informal group comprising preferably of 4 to 10 individuals for the purposes of availing bank loan either individually or through the group mechanism against mutual guarantee.