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Guide to CGTMSE Scheme: Credit Guarantee Fund Trust for Micro and Small Enterprises

Posted on
Jul 27, 2021
Guide to CGTMSE Scheme: Credit Guarantee Fund Trust for Micro and Small Enterprises

A Complete Guide to the CGTMSE Scheme

The availability of bank financing without the need for collateral or third-party guarantees will significantly assist first generation entrepreneurs in realising their goal of establishing a Micro and Small Enterprise unit (MSE). With this purpose in mind, the Government of India’s Ministry of Micro, Small and Medium Enterprises (MSME) developed the Credit Guarantee Scheme of CGTMSE scheme to enhance the MSME loan for new business and promote credit flow to the MSE sector. The Government of India and SIDBI established the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the programme.

What is the CGTMSE Scheme?

The MSME Act, 2006, provides particular protection for micro, small and medium-sized enterprises. These are small-scale enterprises that thrive only with immunity and special protection. These industries serve as the bedrock of the Indian economy. The CGTMSE, which provides loans for business, is one of the government-sponsored programmes for MSMEs.

CGTMSE Scheme: Credit Guarantee Fund Trust for Micro and Small Enterprises

A credit guarantee scheme of CGTMSE under the CGTMSE loan scheme is a scenario in which the applicant’s business loan is guaranteed by a party without the requirement for any external collateral or third-party guarantee. In this case, the member lending institution’s loan is guaranteed by the scheme, which offers guarantee coverage for a significant part of the loan amount. Both new and current micro and small businesses, including service enterprises, are eligible for a collateral-free business loan up to Rs. 2 crores under the CGTMSE scheme.

Features of the CGTMSE Scheme

Interest RateBanks’ interest rates under the Credit Guarantee Scheme of CGTMSE will vary according to the applicant’s profile, company needs, and project cost. Banks provide relatively cheap interest rates in comparison to other direct lending programmes or agreements. Credit guarantee coverage is limited to a maximum of 75% of the total cost of the project.
Credit Guarantee Scheme of CGTMSEWithout collateral security or guarantee from a third party.
CGTMSE Scheme EligibilityMicro and small enterprises with a turnover of up to Rs. 2 crores in manufacturing and services, as well as retail commerce with a turnover of up to Rs. 1 crore.
LenderNBFC, RRBs, Small Finance Bank, PSB, etc.
Guaranteed Coverage75% of the loan/limit that is not secured by collateral.

CGTMSE Scheme Eligibility: Loan Under CGTMSE Scheme

According to the CGTMSE standards, a credit guarantee is defined as a guarantee that provides a borrower with a collateral-free and third-party-guaranteed advance. Under the CGTMSE Scheme Terms and Conditions, member lending institutions, which may also be non-bank financial companies (NBFCs), that lend small business loans in India to the SME and MSME sectors are eligible for a maximum loan amount of Rs. 2 crores, which is intended to cover a significant part of the loan amount in any scenario. The specified CGTMSE scheme eligibility applies to both loan providers and borrowers.

Lending Institutions

It encompasses all scheduled commercial banks, designated Regional Rural Banks, SIDBI, NSIC, NEDFi, SFB, and NBFCs that lend to the particular sector and have signed an agreement with CGTMSE or the Trust to do so. These are referred to as Member Lending Institutions (MLI).

Lending Borrowers

All new and current SMEs will be subject to coverage of the CGTMSE scheme:

  • Loans under CGTMSE scheme up to Rs. 50 lakhs are available with a guarantee cover of up to Rs. 62.50 lakhs/Rs. 65 lakhs.
  • The guarantee ceiling is Rs. 1 crore for loan facilities exceeding Rs. 50 lakhs.
  • Term credit for the full outstanding balance on the day the loan is deemed non-performing or when a suit is filed.


Certain entities are not covered by the CGTMSE scheme. They are as follows:

  • Retail trade
  • Educational establishments
  • Agriculture
  • Groups of Self-Help (SHG)

CGTMSE Scheme Subsidy

CategoryUp to 5 LakhsAbove 5 lakhs but less than 50 lakhsAbove 50 Lakhs but less than 200 lakhs
Micro Enterprises85% of the defaulted amount, up to a maximum of 4.25 lakhs75% of the defaulted amount, up to a maximum of 37.50 lakhs75% of the defaulted amount, up to a maximum of 150 lakhs
Entrepreneurial women/units based in the North East Region (including Sikkim) (other than credit facility up to 5 lakhs to micro enterprises)80% of the defaulted amount, up to a maximum of 40 lakh80% of the defaulted amount, up to a maximum of 40 lakhNA
Other Category75% of the defaulted amount, up to a maximum of 37.50 lakh75% of the defaulted amount, up to a maximum of 37.50 lakhNA

List of Businesses Covered Under the CGTMSE Scheme

The CGTMSE scheme is open to new and current micro, small, and medium-sized enterprises that are involved in the process of:

  • Industrial activity
  • Service activity, except for retail trade, self-help groups, educational institutions, and training institutions.

It is now accessible to some NBFCs as well.

The Extent of the Cover Given by CGTMSE:

Coverage is available up to 80% for:

  • Women entrepreneurs who run and own micro and small businesses can apply for MSME business loans in India under CGTMSE Scheme.
  • All credits and loans extended to India’s northeastern states, including Sikkim.

In the event of default, the trust will pay the claim up to 75% or 80% of the amount not returned, up to a maximum of Rs. 50 lakhs. Guarantee cover is reduced to 50% for sums above Rs. 50 lakhs to Rs. 200 lakhs.

CGTMSE Scheme: Which Financial Institutions are Involved in the CGTMSE Scheme as a Lender?

The following banks are qualified to act as lenders:

  • Commercial banks are included in the schedules, which may be public or private sector-owned or foreign-owned.
  • NABARD has rated many regional rural banks as “sustainably viable.” These banks are eligible to serve as eligible bankers.

There are 133 qualified lending institutions registered with the TRUST as MLIs (as of May 31, 2015), which include the following:

  • 21 Private Sector Banks
  • 26 Public Sector Banks
  • 4 Foreign Banks
  • 73 Regional Rural Banks
  • Kerala Financial Corporation
  • Delhi Financial Corporation
  • Export-Import Bank of India
  • Jammu & Kashmir Development Finance Corporation Ltd.
  • The Tamil Nadu Industrial Investment Corporation Ltd.
  • National Small Industries Corporation (NSIC), North Eastern Development Finance Corporation (NEDFI)
  • Small Industries Development Bank of India (SIDBI)

How to Get a Loan Under the CGTMSE Scheme?: CGTMSE Loan Scheme

Business Entity

Before applying for a loan under the CGTMSE Loan Scheme from the List of Business Covered Under CGTMSE Scheme, register your Private Limited Company, Limited Liability Partnership, or Sole Proprietorship in accordance with the business requirements and acquire the required tax registrations and permissions for doing business.

Business Plan

Conduct market research and produce a business plan that includes information on the business strategy, promoter profile, and anticipated financials, among other things. It is critical that the business plan or project report be produced by experienced experts since the primary goal of the CGTMSE scheme is for banks to prioritise business model verification and to obtain lending facilities without collateral. FlexiLoans can assist you with the preparation of a business plan in accordance with the CGTMSE Loan Scheme.

The Sanction for Loan

Submit the business plan to the required banks that offer loans under the CGTMSE Scheme and seek bank loan sanction from those institutions. Banks will handle loan applications and provide loans following their policies.

CGTMSE Scheme Cover

Once the bank has sanctioned the bank loan, the lender will apply to the CGTMSE organisation for coverage under the CGTMSE programme for the sanctioned loan. Once authorised by the CGTMSE institution, the loan will be subject to the CGTMSE system, with the borrower having to pay the CGTMSE guarantee and service charge.

Documents Required

The following documents are needed for a loan under the CGTMSE Scheme:

  • Filled application form for the CGTMSE loan with passport-sized photos
  • Letter of incorporation/certificate of registration of a business
  • Report on a business project
  • Letter of Coverage for CGTMSE loans
  • A copy of the bank’s loan approval
  • Any additional documentation that the bank may need

CGTMSE Scheme Terms and Conditions: Credit Guarantee Scheme of CGTMSE

  • The first and most important step is to create a comprehensive business plan that includes all pertinent financial and non-financial information to take advantage of this plan. The business plan should be designed in such a way that it explains the project’s feasibility.
  • After developing the business strategy, the choice about which lending bank to contact must be decided. After that, the application and business model should be presented to the bank.
  • The bank will review and verify all of the application’s information and the model of the project provided.
  • After verification, the bank will forward the application to the CGTMSE Fund for further review. If the application is accepted, the Fund will direct the bank to disburse money to the company.
  • Following acceptance, the business will be required to submit the CGTMSE guarantee and service charge.


The Credit Guarantee Fund Trust for Micro and Small Enterprises was established in collaboration with the Ministry of Micro, Small and Medium Enterprises, the Government of India, and the Small Industries Development Bank of India to catalyse the flow of institutional credit to Micro and Small Enterprises. The Credit Guarantee Scheme of CGTMSE was established to strengthen the credit delivery system and to facilitate credit flow to the MSE sector, thereby increasing access to finance for the unserved, underserved, and disadvantaged by making conventional lenders’ financing available to new generation entrepreneurs. CGTMSE has played a key role in providing guarantee coverage for collateral and/or third-party guarantee-free credit facilities granted to MSEs by qualified member lending institutions.

To know more about what MSME loans are and how to apply for business loans, visit FlexiLoans and talk to a FlexiLoans loan advisor.

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