CGTMSE Scheme

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is set up jointly by the Ministry of Micro, Small & Medium Enterprises (MSME), the Government of India, and the Small Industries Development Bank of India (SIDBI) to provide institutional credit to MSEs. Credit Guarantee Scheme (CGS) was introduced to enhance the credit delivery system and to facilitate the flow of credit to the MSE sector, provide access to finance for unserved/ under-served/ underprivileged, and make finance available from conventional lenders to new generation entrepreneurs.

• The ceiling for guarantee coverage has been increased from Rs. 2 Crores to Rs. 5 Crores.
• CGTMSE has touched the milestone figure of approving guarantees worth Rs. 1 lakh crore during FY 2022 - 23.
• The guarantee fee has been reduced to lower the overall cost of borrowings to MSEs.
• Concessions in fees and increased coverage to Scheduled Castes (SCs)/ Scheduled Tribes (STs).
• Micro Finance Institutions (MFIs) as Member Lending Institutions (MLIs) are eligible now.
• The annual guarantee fee structure is revised and the CGTMSE fee is reduced to 0.37%.
• The guarantee fee has been reduced by 10% and the coverage extent has been increased to 85% for women, ZED-certified units, and units in aspirational districts.

CGTMSE loan interest rate or Annual Guarantee Fee (AGF) structure under Credit Guarantee Scheme (CGS-I) on all the guarantees approved/ renewed on or after 01 April 2023 ranges from 0.37% to 1.35% p.a., depending on the loan slab.

To cover the loan under the CGTMSE, the borrower has to pay an additional guarantee fee and service charge in addition to the interest charged by the bank. The cost of the guarantee has been reduced with the revamp of the Credit Guarantee Scheme to increase the flow of credit to MSEs. The revised CGTMSE charges or Annual Guarantee Fee (AGF) structure under the Credit Guarantee Scheme (CGS-I) on all the guarantees approved/ renewed on or after 01 April 2023 is given below:

*Above Rs. 2 - Rs. 5 Crores, 1.35 AGF will be charged on the guaranteed amount for the first year and on the outstanding amount for the remaining tenure of the credit facility.

Following is the process for availing of loans under CGTMSE:

• Form a business entity: Firstly, you have to incorporate a private limited company/ limited liability partnership/ one-person company/ proprietorship based on the nature of your business and get all necessary approvals and tax registrations for commencing the project.
• Prepare a business report: Prepare a business report/plan mentioning relevant information, such as business model, promoter’s profile, projected financials, etc. Present the report to the credit facility along with a filled and signed application for getting the loan under the CGTMSE scheme. 
• Loan sanction: Banks will analyze your business viability after you submit the application and business plan. If they are satisfied, they will process your loan application, and provide sanction, as per their policy.
• Obtaining the guarantee cover: Post CGTMSE loan sanction, the bank applies CGTMSE authority to obtain the guarantee cover. If the loan request is approved by CGTMSE, you will have to pay a guarantee fee and service charge.

You will be required to submit the following documents to get a loan and CGTMSE coverage under the CGTMSE scheme:

• Duly filled and signed CGTMSE loan application. 
• Recent passport-size photographs.
• Business Incorporation/ Company Registration Certificate
• Business Project Report
• CGTMSE Loan Coverage Letter
• A copy of loan approval from the bank
• Any other document as required by the bank

The following are the CGTMSE scheme eligibility criteria:

• Eligible borrowers: All existing as well as new Micro and Small Enterprises (MSEs)
• CGTMSE bank list that offers loans under CGTSME Scheme: Non-Banking Financial Companies (NBFCs), Scheduled Commercial Banks (SCBs), Regional Rural Banks (RRBs), Small Finance Banks (SFBs), National Small Industries Corporation (NSIC), Small Industrial Development Bank of India (SIDBI), and North Eastern Development Finance Corporation Ltd. (NEDFi).
• Small and Micro-Enterprises (SMEs) owned and/or operated by women are eligible for a guarantee cover of 80%.
• All the loans in the North East Region (NER) are eligible for a guarantee of Rs. 50 Lakhs.
• The CGTMSE loan limit entirely depends on the applicant’s profile and business requirements.
• Educational institutions, training institutions, agriculture, and Self-Help Groups (SHGs) are not eligible for CGTMSE guarantee cover.

• The trust guarantees up to 75% of the principal amount (up to 85% for select categories).
• The cover provides a maximum guarantee limit of Rs. 37.50 Lakhs for credit facilities up to Rs. 50 Lakhs.
• The credit along with the interest is covered for the one-quarter period and/or outstanding capital advances, as on the date of the account becoming an NPA (Non-Performing Asset) or as on the date of filing the suit (whichever is lower).
• Charges like penal interest, service charge, commitment charge, or any other levy/expense do not qualify for the guarantee cover.

Below is the detailed information on the CGTMSE scheme subsidy or coverage limit under CGTMSE:

Following is the list of banks that offer CGTMSE Loans: