Mumbai, Aug. 12 -- India's microlenders have sought a sovereign-backed scheme that would guarantee bank loans to these institutions, allowing access to cheaper capital as they face a funding squeeze.

The Microfinance Institutions Network (MFIN) has sought a Rs.15,000-20,000 crore guarantee scheme and wrote to the government on 15 July, Alok Misra, director and chief executive of the industry body, told reporters on Tuesday.

Misra said the proposed scheme is not a typical borrower-level guarantee. "It (an earlier guarantee scheme) was Rs.7,500 crore; the entire money came back, and nobody broke the guarantee. It restarted a virtuous cycle and had no fiscal implications," he said.

He said that discussions with the bankers are underway, a...