CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) Scheme

CGTMSE Scheme is introduced by the Government of India. It is an initiative in collaboration with the MSME or Ministry of Micro, Small and Medium Enterprises and the SIDBI which is the Small Industries Development Bank of India. It was launched on August 30, 2000. CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises and it stands for the same. It is a funding institution that provides credit guarantee to all the financial institutions that give loans to all the SMEs and MSMEs.  

The primary goal of CGTMSE is to support new age entrepreneurs to set up SMEs and MSMEs. This scheme allows them to do that by being able to get loans from the financial institution as they will help the economy of India in the coming times. The agreement covers non-payment by the borrower to pay back the advance. So, the CGTMSE scheme mostly pictures the provision of loans to the new generation entrepreneurs. This way they can achieve and succeed in the highly competitive environment without any help from third-parties or any burden on them. And the financial institutions will be provided aid as the security amount for funding these SMEs and MSMEs by the small businesses up to a limit.

Features of the Credit Guarantee Scheme

The main objective of the CGTMSE scheme is to pay attention in creating and strengthening a good credit relief system which will promote a much better credit flow in the SMEs and MSMEs. Some of the other features are as follows.

  • Assured re-payment of 75% or 85% for the default loan amount which is up to INR 50 lakhs.
  • The maximum assured amount is 50% of loan amount if it’s more than INR 50 lakhs and less than INR 1 crore.
  • Offers 85% of the repayment for the loans which are up to INR 5 lakhs for the micro-enterprises.
  • The assured amount for repayment is 80% of the whole loan amount if the MSME is endorsed by a woman or the unit is in the North East Region.
  • The refund procedure or the loan recovery covers up the entire loan amount along with the interest factor for the time of 3 months and 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.

CGTMSE Scheme Eligibility Criteria

According to the CGTMSE rules and guidelines, the credit guarantee is given back to the borrower with a collateral and third party assurance along with the free advance. The lending financial institution which can also be a NBFC as well who will be lending to SME and the MSME sectors are qualified for a maximum credit for up to INR 2 crore under this scheme which is also meant to be cover a large part of the loan amount. The eligibility for this scheme both the lenders and borrowers need to have are-

Lending Institutions

This wraps up all the whole range of scheduled commercial banks, specified Regional Rural Banks, SIDBI, NSIC, NEDFi, SFB and NBFCs who will be lending to the certain sectors and have already made into an agreement with CGTMSE or the Trust for the intention. These are appointed as Member Lending Institutions and are total 131 in numbers.

Lending Borrowers

The CGTMSE exposure has conditions to all the new and existing SMEs-

  • The maximum credit facility is INR 50 lakhs for a guarantee cover not exceeding INR 62.50 lakhs.

  • For credit facility above INR 50 lakhs, the guarantee cap is limited to INR 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.


Some entities are not included in CGTMSE coverage

Those are

  • Retail Trade.
  • Educational Institutions.
  • Agriculture.
  • Self Help Groups (SHG).
  • Training Institutes.

CGTMSE Application

It is the responsibility of the lender to apply for qualified credit benefits and facilities when they are sanctioned. The allowed standard for seeking assured cover and allowed terms & conditions are as follows.

  • It is allowed only through the calendar quarter newest by the end of the ensuing calendar quarter.
  • The guarantee will start the date the CGTMSE fees are paid.
  • The cover must run for specific time of the agreement for the Term and Composite Loans.
  • If only Working Capital Loan is given to the borrower, the recovering period can be five years or any time given by CGTMSE.

Documents Required for CGTMSE Loan 

To avail the credit facility or loan from the lender requires certain activities that need to be done by the borrower for a hassle-free experience. The steps required for that are as follows.

Establishment of the Business Entity

The business has to be including a separate business enterprise in the suitable category like partnership, proprietorship or a limited company which has appropriate approvals along with tax registrations and certificates which is needed for the execution of the project.

Business Project Report

The mechanism of this project must be nicely defined based on a detailed and thorough market study and analysis. The fact that is mandatory to cover are-

  • Business Model.
  • Promoter Profile.
  • Cost and other Financials.


 The project report and the CGTMSE loan application form has to be submitted to the lender for processing further. If all the research is properly done, then the first step towards a successful achievement of the process is taken.

CGTMSE Scheme Banks Sanction

 After the CGTMSE application forms are submitted successfully, the processing starts. Then after proper evaluation and estimation the capability of the project sanction is given in alignment with the lender’s policy.

Obtaining CGTMSE Loan Cover

 After the loan is sanctioned, it is responsibility of the lender to file for guarantee cover at the CGTMSE.

Interest Rate for CGTMSE Loan

All lenders inflict an assured cost to the borrower. The main component of the cost to the borrower is the interest rate for the loan. Majority of the lenders recover CGTMSE loan interest rate that does not exceed 14% to 18% including the guarantee cover.

Official Website

You can learn more about this scheme on

Frequently Asked Questions

Q. Which institutions are qualified to lend under this scheme?

All scheduled MLIs, including PSUs; private and foreign banks in addition to selected regional and rural banks are eligible for a guarantee cover under this scheme.

Q. Are small road transporters and water transporters eligible for this scheme?

Yes, small road and water transport loans are eligible for this scheme.

Q. Is it necessary for the borrower to obtain IT-PAN to become an eligible borrower?

Yes, a borrower is vital to obtain an IT-PAN to become eligible. 

Q.  Is it compulsory for the borrower to obtain all the credit facilities from a single MLI?

Yes, the credit facilities can be extended by more than one MLI jointly and separately to any eligible borrower with a maximum capacity of INR 100 lakhs per borrower.

Q. Is joint financing with a commercial bank allowed under the scheme?

Yes, joint financing through a financing institution and a commercial bank can be allowed under this scheme. 

 Q. Is there any ceiling for the interest rate to be levied on the credit facility advanced to the borrower if the same is to be covered under the CGS?

The lending institution has to follow RBI guidelines related to the levied interest on micro and small enterprises but the interest rate cannot exceed more than 4% over and above the base rate of the lender. 

Q. What are the Member Lending Institutions I can approach?

You can reach out to any MLI for your MSME loan and to get the CGTMSE guarantee.