Economics • Banking & FinanceMedium
What is the primary function of the 'Credit Guarantee Fund for Micro Units (CGFMU)' established in India?
A. To provide credit guarantee support for loans extended under the Pradhan Mantri Mudra Yojana (PMMY)✓ Correct Answer
B. To refinance scheduled commercial banks lending to large infrastructure projects
C. To insure retail investor deposits against bank failures up to specified monetary limits
D. To settle wholesale government securities transactions through electronic book-entry systems
💡 Solution & Explanation
The Credit Guarantee Fund for Micro Units was established to provide guarantee support for collateral-free loans extended by banks and microfinance institutions under the Pradhan Mantri Mudra Yojana. Other financial institutions handle sovereign debt settlement or deposit insurance rather than micro-loan guarantees. Mudra loans are classified into Shishu, Kishor, and Tarun categories.
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