NEW DELHI, Jan. 6 -- The finance ministry is weighing a plan to provide credit guarantee cover to funds that NBFCs raise from banks and ramp up their microfinance operations, according to two people familiar with the development.

The proposed one-time credit guarantee scheme will help non-banking financial company-microfinance institutions (NBFC-MFIs) access funds from banks easily and tide over a liquidity crunch in maintaining their lending to low-income households that lack access to traditional banking.

The guarantee cover under consideration will be larger than the Rs.7,500 crore cover that was offered during the pandemic. The new scheme is likely to be managed by the state-run National Credit Guarantee Trustee Company, which will ...