New Delhi, March 20 -- The Centre on Friday launched a Rs.20,000 crore credit guarantee scheme to revive bank lending to microfinance institutions (MFIs), as the sector grapples with persistent liquidity constraints despite improving asset quality.

According to a paper issued by National Credit Guarantee Trustee Company (NCGTC), the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) will be effective from 20 March 2026 and will cover loans sanctioned by member lending institutions (MLIs) to MFIs until 30 June 2026.

It will provide guarantee cover for loans extended by these lenders to MFIs for on-lending to small borrowers, in line with Reserve Bank of India norms.

The scheme builds on an earlier credit guarantee pr...