Under the scheme, the government channels dedicated funds into SIDBI under a mechanism known as the Portfolio Risk Fund (PRF). These funds are used to offset a major portion of the fixed deposit that MFIs and NGOs must furnish when applying for financial support. Currently, SIDBI mandates a security deposit equivalent to 10 percent of the sanctioned loan amount. Of this requirement, the borrowing institution contributes just 2.5 percent, or one-quarter of the deposit, while the remaining 7.5 percent is covered through the government-backed PRF.
Officials describe the initiative as a focused strategy to bring robust micro financing opportunities to States and districts where formal credit penetration remains low. By reducing the upfront financial burden on smaller MFIs and grassroots NGOs, the scheme aims to encourage wider participation in lending activities that support self-employment, small enterprise development, and livelihood creation.
Eligible MFIs and NGOs can apply by submitting proposals to SIDBI in the prescribed format. The Micro Finance Programme, to which this scheme is linked, continues to serve as one of the government’s core tools for expanding economic opportunities among low-income communities.
As the Centre intensifies efforts to deepen financial outreach, the enhanced risk-sharing model is expected to strengthen the operational capacity of micro lenders and accelerate the flow of credit to regions that need it most—marking a significant step toward reducing economic disparities and fostering grassroots enterprise across the country.
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