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Cgtmse Scheme


CGTMSE is an initiative of the Government of India in collaboration with the Ministry of Micro, Small and Medium Enterprises (MSME) and the Small Industries Development Bank of India (SIDBI) launched on 30th August 2000. The CGTMSE full form is Credit Guarantee Fund Trust for Micro and Small Enterprises, and as is evident from the name, it is a Trust which provides the financial institutions with credit guarantee to provide loans to SMEs and MSMEs.

The basic aim of CGTMSE is to encourage first-time entrepreneurs to establish SMEs and MSME, considered to be the bulwark of the Indian economy by availing of collateral-free loans from eligible financial institutions. The guarantee covers default by the borrower to repay the advance. Thus, the CGTMSE scheme primarily envisages the provision of loans to first-generation entrepreneurs so that they can flourish in the competitive environment without the burden of security or third-party guarantees. In turn, the financial institutions are provided cover for the absence of security to fund SMEs and MSMEs promoted by small Indian businessmen up to a certain limit.

Features of the Credit Guarantee Scheme:

One of the key objectives of CGTMSE coverage is the focus on the creation of a robust credit relief system that promotes better credit flow to SMEs and the MSME sector. The stand out features of the CGTMSE scheme is:

  • Guaranteed repayment of 75% or 85% in some cases for the defaulted principal loan amount up to Rs.50 lakh.
  • The maximum guarantee is 50% for loan amounts greater than Rs.50 lakh but under Rs.1 crore.
  • Provides 85% repayment for loans up to Rs.5 lakhs to micro-enterprises.
  • The guarantee amount for repayment is 80% of the loan amount in case the MSME is promoted by a woman or the location of the unit is in the North East Region (NER).
  • The repayment procedure or CGTMSE loan recovery covers the entire loan amount inclusive of the interest component for a period of 3 months and/ or the entire outstanding loan amount along with the accrued interest from the suit filed date or the day when the loan turns into an NPA, whichever is lower.
  • Rehabilitation of business units if the failure is beyond the control of the management to the extent of Rs.1 crore as support to the lender for assistance in resuscitating the enterprise.
  • Maximum Guarantee Cover:





The maximum amount of credit facility

Up to Rs. 5 lakh

More than Rs. 5 lakh to Rs. 50 lakh

More than Rs.50 lakh to Rs. 2 crores

Micro Enterprises

85 percent of the default amount maximum of Rs. 4.25 lakhs.

75 percent of the default amount maximum of Rs. 37.50 lakhs.

75 percent of the default amount maximum Rs.1.5 crores

Women and Units in NER

80 percent of the default amount maximum Rs.40 lakhs for credit facility up to Rs.50 lakhs. 

All others

75 percent of the default amount maximum Rs.40 lakhs for credit facility up to Rs.50 lakhs. 

Business activity

Credit from Rs.10 lakhs to Rs. 1 crore

MSE Retail Trade

50% of the default amount maximum of Rs.50 lakhs.

CGTMSE Scheme Eligibility Criteria:

As per the CGTMSE guidelines, a credit guarantee is deemed to back a borrower with collateral and third party guarantee free advance. Under the scheme, the member lending institution which can be an NBFC also, who lend to the SME and MSME sector are eligible for a maximum credit cap of Rs. 2 crores, which in any case is meant to cover a large proportion of the loan amount. The eligibility norms prescribed both for the credit providers and borrowers are.

  • Lending Institutions: It covers the whole gamut of scheduled commercial banks, specified Regional Rural Banks, SIDBI, NSIC, NEDFi, SFB and NBFCs who lend to the specific sector and have entered into an agreement with CGTMSE or the Trust for the purpose. These are designated as Member Lending Institutions (MLIs) and number 131 at present.
  • Lending Borrowers: The CGTMSE coverage is conditional to all new and existing SMEs:
    • The maximum credit facility is Rs.50 lakhs for a guarantee cover not exceeding Rs. 62.50 lakhs / Rs.65 lakhs.
    • For credit facilities above Rs.50 lakhs, the guarantee cap is limited to Rs. 1 crore.
    • Term credit for the entire outstanding amount on the date the loan is declared to be an NPA or on the date of filing a suit.
  • Exclusions: Some entities are excluded from the CGTMSE coverage. They are:
    • Retail Trade.
    • Educational Institutions.
    • Agriculture.
    • Self Help Groups (SHG).
    • Training Institutes.

CGTMSE Application:

It is incumbent upon the lender to apply for eligible credit facilities when they are sanctioned. The accepted norms for seeking guarantee cover and applicable terms are:

  • Sanctioned during the calendar quarter latest by the end of the subsequent calendar quarter.
  • The guarantee will commence the date the CGTMSE fee is paid.
  • The cover shall run for the agreed-upon tenure for the Term and Composite Loans.
  • If only Working Capital Loan is provided to the borrower, the period of cover shall be 5 years or any other period specified by CGTMSE.

Documents Required for CGTMSE Loan Process:

Availing of a credit facility or loan from the lender entails a series of activities on the part of the borrower for a seamless experience. The major steps for the CGTMSE loan scheme can be tabulated as under:

  • Establishment of the Business Entity: The unit has to be incorporated a distinct business enterprise in the appropriate category like proprietorship, partnership or a limited company and necessary approvals, certificates and tax registrations are need to be obtained to execute the project.
  • Business Project Report: The components of the project must be well defined based on a thorough market study and analysis. The factors to be mandatorily covered are:
    • Business Model.
    • Promoter Profile.
    • Cost and other Financials.
  • Submission: The project report and the CGTMSE loan application form are to be submitted to the lender for further processing. If the homework is proper, the first step towards successful completion of the process is taken.
  • CGTMSE Scheme Banks Sanction: Once the CGTMSE application forms are successfully submitted, the processing begins. After proper evaluation and gauging of the viability of the project, sanction is accorded in alignment with the lender’s policy.
  • Obtaining CGTMSE Loan Cover: After according sanction to the loan, it is the responsibility of the lender to file for guarantee cover at the CGTMSE.

Interest Rate for CGTMSE Loan:

All lenders impose a certain cost on the borrower. The major component of the cost to the borrower is the interest rate for the loan. The majority of the lenders recover the CGTMSE loan interest rate that does not exceed 14% to 18% including the guarantee cover.

Recovery of CGTMSE Fee named Annual Guarantee Fee (AGF):

Annual Guarantee fee recovered after 1st April 2018 per annum. The fee charged is on the Guarantee amount for the 1st year and on the outstanding amount in subsequent years.

Quantum of credit facility

MEs for women and NER

Up to Rs.5 lakhs

1.00 + Risk Premium

Over Rs.5 lakhs  up to Rs.50 lakhs

1.35 + Risk Premium

1.50 + Risk Premium

Over Rs.50 lakhs  up to Rs.2 crores

1.80 + Risk Premium

Risk Premium on NPA – Guaranteed

Risk Premium of CGTMSE claim

NPA Percent

Risk Premium

Claim Payout

Risk Premium






10% of SR


10% of SR


15% of SR


15% of SR


20% of SR


20% of SR


25% of SR


25% of SR

** SR stands for Standard Rate

The importance of Lendingkart:

We at Lendingkart offer MSME loans tailor-made for the entrepreneurs desiring to establish such units. We offer a few redeeming features drawing prospective borrowers to this product by offering seamless online processing that ensures the completion of the process in 72 hours. We also offer the loan without collateral with a tenure extending up to 2 years with customized EMIs. The liberal quantum between Rs.50000 and Rs.1 crore empowers the borrower to face the competitive business environment prevailing in the country.


1. Apart from the AGF, is there any Annual Service Fee at CGTMSE?

All loans prior to 1st January 2013 enjoying guarantee cover provided by any MLI shall continue to pay ASF at the following rates:

  • Credit facility up to Rs.5 lakhs: 0.50% of the guarantee amount.
  • Credit facility from Rs.5 lakhs up to Rs. 1 crore: 0.75% of the guarantee amount

2. What is the CGTMSE claim settlement procedure?

There is a lock-in period of 18 months after the disbursal of the final tranche of the loan for preferring claim. The lender shall however prefer the claim once the defaulted account has been notified as NPA and recovery proceedings have commenced by way of filing suit as defined by CGTMSE from time to time.

3. Is a private sector or a foreign bank eligible for CGTMSE cover?

Yes, on condition that the lender listed as a commercial bank to the Schedule I to the RBI Act, 1934.

4. Does the Trust re-evaluate the recommended guarantee cover forwarded by the MLI?

It is assumed that the MLIs have exercised due diligence and only viable proposals are forwarded. Accordingly CGTMSE accepts the proposal.

5. How is CGTMSE advantageous for business?

SMEs and MSME contribute about 10% of the GDP in India. Additionally they provide employment to 7 crore people as per a conservative estimate. Considering the constraints faced by the sector in accessing credit facilities, the CGTMSE goes a long way in removing the hurdles allowing the lenders to be liberal in extending credit.
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CGTMSE Increased Guarantee for MSEs from 2 crores to 5 crore

The CGTMSE increased the guarantee for MSEs from 2 crores to 5 crores/borrower for small businesses and financial institutions.

Key points

  • Every year changes are made to the loan growth of MSE to 13.2%
  • It will effective from April 1, 2023
  • The threshold for dropping legal action was raised from Rs 5 lakh to Rs 10 lakh
  • Rs 5,87,494 is credited to the MSEs from scheduled commercial banks
  • The annual guarantee fee was reduced that used to be passed on to the borrowers

Credit Guarantee Fund Scheme for MSEs:

  • The scheme was introduced on August 30, 2000, by the government of India to easily access collateral-free credit to MSEs and it was effective on January 2001. CGTMSE is associated with Government and SIDBI in the ratio of 4:1 respectively
  • Co-lateral free credit is provided by this scheme to the new and existing financial institution and small businesses.
  • The credit guarantee program guarantees a lender that the trust will cover a loss of up to 75–85% of the credit facility if an MSE unit that has used collateral-free credit facilities fails to pay its debts.

News Updated Date: 15th May 2023

FE Exclusive: Loans to retail, and wholesale traders under CGTMSE to be treated at par with other segments

Credit and finance for MSMEs: The government’s credit guarantee scheme for micro and small enterprises (MSEs) under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has brought retail and wholesale trade by MSEs at par with other segments or activities eligible for credit guarantee cover under the scheme. However, for new categories of borrowers viz., women and SC-ST entrepreneurs, ZED-certified MSEs, and those based in aspirational districts, the cover limit is 85 percent.

In terms of AGF, CGTMSE had last week announced reducing the fee by 10 percent for MLIs with healthy loan portfolios in order to encourage them to enhance credit flow to MSEs. For loans up to Rs 10 lakh, the fee has been reduced from the standard rate of 0.75 percent across all activity including trading to 0.68 percent. Likewise, for Rs 10 lakh to Rs 50 lakh loans, the AGF has dropped from 1.10 percent standard rate to 0.99 percent while for loans ranging from Rs 50 lakh to Rs 2 crore, the AGF stands at 1.08 percent from earlier 1.20 percent.

News Updated Date: 16th December 2022

CGTMSE: Loan Guarantee Amount To Micro, Small Enterprises Near Pre-Covid Levels In H1 FY23 Itself

The amount of loan guarantees approved by the Credit Guarantee Scheme (CGS), which supports collateral-free credit flow to micro and small enterprises under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), is getting close to pre-Covid or FY20 levels. In a little more than the first half of the current fiscal year, 5.36 lakh loan guarantees totaling Rs 45,043 crore were approved, according to data from the MSME Ministry. Sandeep Varma, Chief Executive Officer, CGTMSE, claims that the rise in average ticket size is to blame for the increase in CGTMSE takers. “The increase can be attributed to an increase in average ticket size, which went from close to Rs. 7 lakh to close to Rs. 6 lakh as MSEs needed more funding to resurrect their businesses.

As we try to rework the scheme’s parameters to make it available to more beneficiaries, we anticipate that this growth will continue. We have taken a proactive approach to get in touch with more lenders,” Varma had previously told FE Aspire.

News Updated Date: 31st October 2022

The Tamil Nadu government offers support to business loan seekers

In a move to support MSMEs (Micro small and Medium Enterprises), the Tamil Nadu government has got together with the CGTMSE (Credit guarantee trust for micro and small enterprises) to facilitate the small and micro enterprises to take loans. The Tamil Nadu government, with the CGTMSE, is offering 90% credit guarantee for loans up to Rs 40 lakhs and 80% guarantee for loans more than Rs 40 lakhs up to Rs 2 crores.  

The MSME secretary has welcomed this initiative but revealed that this facility would initially be available to eligible enterprises who are affiliated with TAICO (Tamil Nadu Industrial Cooperative Bank) and TIIC (Tamil Nadu Industrial Investment Corporation). The state government has allocated Rs 100 crores for this purpose. 

The personal involvement of Tamil Nadu Chief Minister Stalin is a big boost to the scheme and it is expected to benefit micro and small enterprises in the state.

News Updated Date: 22nd September 2022

MSE Loan Agreements Increase By 14% To Over 7 Lakh In FY22: CGTMSE

There have been over 7 lac approved collateral-free loans in the fiscal year 2022 for small-time enterprises, as reported by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). This has been the second-highest in the past FY15, the highest being 8,38 lac guarantees in FY20. The exact loan guarantees were 7,09,883, which amounts to INR 55,217.74 crore. 

The 14 percent increase over the past year is greatly attributed to the post-pandemic credit demand among MSMEs (Micro, Small and Medium Enterprises). This year’s budget, as announced by Nirmala Sitharaman, includes revamped schemes and infused funds. That leads to an additional credit of up to INR 2 lac crores for business opportunities. But, as recommended by the Parliamentary Standing Committee, the limit can be increased to INR 5 lac crores.

News Updated Date: 19th April 2022

Credit and Financial Opportunities for MSMEs, CGTMSE to be Revamped: Budget 2022

Nirmala Sitharaman, finance minister, in her budget speech on Tuesday, said that Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) would be revamped. Additional Rs 2 lakh crore under the scheme will benefit micro and small enterprises (MSEs). Presently, the scheme restricts the eligible borrowers to avail up to Rs 2 crore of credit. Mukesh Mohan Gupta, Founder and CEO, No Defaulters and President CIMSME, said that the scheme would expand job opportunities and support the MSMEs and startups.

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme was set up in 2000 by the MSME Ministry and SIDBI. Utkarsh Sinha, Managing Director, Bexley advisors, said that the scheme would ease the credit crunch for MSMEs. Sinha also stressed the need for equity funding in MSMEs. However, timely implementation will ensure the empowerment and growth in employment of the MSME sector.

Updated Date: 09-02-2022

NBFCs want Government to reinstate CGTMSE guarantee cover to 75% for more MSME lending

The Credit Guarantee Fund Trust for Micro and Small Enterprises was set up jointly by the MSME industry and SIDBI in 2000 to catalyze the flow of credit for the MSME’s. In February 2018, policies regarding this scheme were changed including the increase in guarantee coverage from 50% to 7%. But earlier this year it was reduced to 50 %. Several NBFCs feel that it needs to be taken back up to 75% as the scheme had started to gain traction and is essential for the recovery of the Covid hit MSME sector. The MSME sector has suffered a lot during the pandemic and thus the portfolio of the lenders has suffered as well.

Updated Date: 11-10-2021

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