The Union Cabinet on Wednesday approved the extension of two credit guarantee schemes for another five years, allocating ₹4,111 crore for the Stand-Up India fund and ₹5,000 crore for the Micro Units fund under the Pradhan Mantri Mudra Yojana (PMMY). The move aims to improve access to collateral-free loans for women, SC/ST entrepreneurs and micro businesses, according to an official release.

Under the Credit Guarantee Fund for Stand-Up India, the government will guarantee loans ranging from above ₹10 lakh to ₹1 crore. The facility will support women and SC/ST entrepreneurs setting up new businesses, also known as greenfield enterprises.

The scheme aims to provide an average of two loans through every bank branch. One loan will go to a woman entrepreneur and the other to an SC/ST entrepreneur. The annual guarantee fee will be 0.50%, with no additional risk premium. The government will also increase the guarantee cover to 85% across all loan sizes.

Entrepreneurs will receive assistance throughout the loan process and different stages of their business operations.

Meanwhile, the PMMY Credit Guarantee Fund is expected to support Mudra loans worth ₹12.60 lakh crore. It will cover Mudra loans of up to ₹20 lakh, overdrafts of up to ₹10,000 under the Pradhan Mantri Jan Dhan Yojana and self-help group loans ranging from ₹10 lakh to ₹20 lakh. These loans will be available without collateral.

The government will reduce the annual guarantee fee under the Mudra scheme from 1% to 0.75%. It also plans to strengthen the loan claim process for lenders to ensure smoother credit flow to micro entrepreneurs.