Banks have fully utilised Rs 7,500 crore under the Credit Guarantee Scheme for Micro Finance Institutions (MFIs) to benefit the smallest of the borrowers, the finance ministry said on Wednesday. The scheme was announced by Finance Minister Nirmala Sitharaman in June as part of a Rs 6.29 lakh crore package to provide relief to various sectors affected by the second wave of the COVID-19 pandemic.

"Credit Guarantee for MFIs fully utilised within 75 days. Rs 7500 crore sanctioned to #MFIs under #CGSMFI for on-lending to small borrowers. Big boost to consumption and livelihoods," the ministry said in a tweet. Under the scheme, lending of up to Rs 1.25 lakh was provided.

Credit Guarantee for MFIs fully utilised within 75 days. ₹7500 cr sanctioned to #MFIs under #CGSMFI for onlending to small borrowers. Big boost to consumption and livelihoods.(1/2) pic.twitter.com/SdrydP5ALR

— Ministry of Finance (@FinMinIndia) September 29, 2021

"#CGSMFI supported 92 NBFC-MFIs/MFIs through 20 lenders. MFR-2 and below MFIs received around 45 percent of the sanction amount at reasonable rates. The scheme played catalytic role in facilitating credit to bottom of the pyramid borrowers in these difficult times," it added. Loans from banks are capped at the marginal cost of funds based lending rate (MCLR) plus 2 percent. Maximum loan tenure is three years, and 80 percent of assistance is to be used by MFIs for incremental lending.

Interest rates will be at least 2 percent below the maximum rate prescribed by RBI.