CGTMSE scheme loan limit
The maximum collateral-free credit that can be guaranteed under CGTMSE has been raised to Rs. 10 crore. The earlier ceilings of Rs. 1 crore, then Rs. 2 crore, then Rs. 5 crore have all been superseded by the Rs. 10 crore limit for standard micro and small enterprises.
| Borrower type | Maximum guarantee cover |
|---|
| Standard Micro and Small Enterprises | Up to Rs. 10 crore |
| DPIIT-recognised startups (under CGSS) | Up to Rs. 20 crore |
| Maximum credit risk borne by CGTMSE | Rs. 7.5 crore (75% of the Rs. 10 crore cap) |
Where a lender extends credit of more than Rs. 10 crore to an eligible borrower, the guarantee cover is restricted to Rs. 10 crore — the amount above Rs. 10 crore is not covered by the Trust. The actual loan amount sanctioned to a specific business still depends on its size, project cost, repayment capacity, and the lender's own credit policy.
How does the CGTMSE scheme work?
CGTMSE operates as a risk-sharing mechanism between the lender and the Trust. The borrower does not apply to CGTMSE directly — the lender does, on the borrower's behalf. The process:
| Step | What happens |
|---|
| 1. Loan application | A micro or small enterprise applies for a business loan from a CGTMSE Member Lending Institution (bank or NBFC) |
| 2. Loan evaluation | The lender assesses business viability, financial projections and credit profile — without requiring collateral |
| 3. Loan sanction | If approved, the lender sanctions the collateral-free loan |
| 4. Guarantee cover | The lender registers the loan with CGTMSE and pays the Annual Guarantee Fee to secure cover of 75%-85% of the amount |
| 5. Default protection | If the borrower defaults, CGTMSE compensates the lender for the guaranteed portion of the outstanding amount |
This is a risk-mitigation tool, not a subsidy. The borrower still has a full legal obligation to repay the loan. The guarantee protects the lender, not the borrower.
What is the guarantee coverage percentage under the CGTMSE scheme?
Under the CGTMSE scheme, cgtmse guarantee coverage generally ranges from 75% to 85% of the sanctioned loan amount, depending on the borrower category. Standard coverage is 75%, while eligible micro enterprises and specified priority groups can receive up to 85% guarantee coverage, subject to the scheme's applicable conditions.
| Borrower category | Guarantee coverage |
|---|
| Micro enterprises (up to Rs. 5 lakh) | Up to 85% |
| Women entrepreneurs, SC/ST borrowers, businesses in Aspirational Districts, and the North East Region | Up to 85% (with additional fee concessions, where applicable) |
| Other Micro and Small Enterprises | 75% (standard) |
| Retail and wholesale trade | As per the applicable scheme provisions and coverage bands |
Coverage bands under the CGTMSE scheme are revised periodically. Always verify the applicable guarantee percentage with your lender or the latest CGTMSE guidelines before applying.
New CGTMSE Fee Structure (Effective April 1, 2025)
The Annual Guarantee Fee was revised downward for all guarantees approved or renewed on or after 1 April 2025, under CGTMSE Circular No. 251/2024-25 dated 18 March 2025. The AGF is charged per annum on the guaranteed amount in the first year and on the outstanding loan balance in subsequent years. The single, current CGTMSE fee structure is:
| Loan amount slab | Standard AGF (per annum) |
|---|
| Up to Rs. 10 lakh | 0.37% |
| Above Rs. 10 lakh to Rs. 50 lakh | 0.55% |
| Above Rs. 50 lakh to Rs. 1 crore | 0.60% |
| Above Rs. 1 crore to Rs. 2 crore | 0.85% |
| Above Rs. 2 crore to Rs. 5 crore | 1.00% |
| Above Rs. 5 crore to Rs. 10 crore | 1.10% to 1.20% |
Fee concessions
- Women-owned businesses, SC/ST entrepreneurs, ZED-certified units, and units in the North East Region and Aspirational Districts receive an additional 10% discount on the standard AGF
- MLIs with a better portfolio risk profile may receive a 10% discount on the standard rate; high-risk MLIs may be charged a risk premium of up to 70% of the standard rate
- The lender decides whether to pass the AGF on to the borrower or absorb it — confirm this in your sanction letter
Important: The AGF is the CGTMSE guarantee fee only. It is separate from, and in addition to, the interest rate the lender charges on the loan itself.
Types of credit facilities available under the CGTMSE scheme
The CGTMSE scheme provides various credit facilities tailored to meet the financial needs of Micro and Small Enterprises (MSEs) in India. These include:
- Term loans: Designed for long-term investments such as purchasing equipment, machinery, or fixed assets.
- Working capital loans: Offers funds to support daily business operations and ensure smooth cash flow for business continuity.
- Composite loans: Combines term loans and working capital loans, enabling MSEs to address both operational and investment needs with a single loan.
- Fund-based facilities: Direct financial assistance in the form of loans or advances for business growth and operational needs, including overdrafts and cash credit.
- Non-fund-based facilities: Includes guarantees or letters of credit to facilitate business transactions without requiring immediate cash payment.
All these credit options are provided without the need for collateral or third-party guarantees, simplifying access to funds for MSEs.
Credit facilities not covered under the CGTMSE schemes
Credit facilities not covered under the CGTMSE schemes include:
- Loans for educational, training, and self-development purposes.
- Retail trade or consumer loans.
- Any loans for agriculture, fisheries, and livestock sectors.
- Loans for self-help groups (SHGs).
- Microfinance and loans under the direct agriculture category.
- Credit facilities availed for non-business purposes.
- Loans secured by collateral or third-party guarantees.
- Any credit facility for enterprises in sectors deemed ineligible by CGTMSE.
- Facilities availed by enterprises that are not classified as Micro or Small Enterprises (MSEs).
Who is eligible for the CGTMSE scheme?
CGTMSE scheme eligibility has two requirements: the borrower must satisfy the cgtmse scheme eligibility criteria, and the loan must be sanctioned by a Member Lending Institution (MLI). Under the cgtmse scheme, eligible businesses generally require Udyam registration and must meet the lender's cgtmse loan eligibility norms for collateral-free finance.
Eligible borrowers
- New and existing micro and small enterprises (MSEs) as defined under the MSMED Act
- Enterprises engaged in manufacturing, services, and retail or wholesale trading
- Businesses with a valid Udyam registration
- Credit facilities sanctioned without collateral or third-party guarantee, or under the Hybrid Security model
Eligible lenders (Member Lending Institutions)
- Scheduled commercial banks (public and private sector)
- Regional Rural Banks (RRBs)
- Small Finance Banks (SFBs)
- Select Non-Banking Financial Companies (NBFCs)
- State Financial Corporations (SFCs) and other institutions registered as MLIs with CGTMSE
Eligible sectors
- Manufacturing, including textiles, food processing, engineering, and other small-scale production units
- Services, including IT, consulting, hospitality, and healthcare
- Retail and wholesale trade
- Agro-based micro enterprises engaged in agricultural processing and marketing (excluding crop cultivation)
- Ancillary units and cottage industries
Can startups avail CGTMSE scheme loans?
Yes. DPIIT-recognised startups can access collateral-free funding of up to Rs. 20 crore under the linked Credit Guarantee Scheme for Startups (CGSS), subject to meeting the eligibility conditions. Startups must have Udyam registration and apply through a CGTMSE Member Lending Institution rather than directly to CGTMSE. For example, Priya, a 28-year-old DPIIT-recognised tech startup founder in Bengaluru, secured a Rs. 15 lakh collateral-free loan through a CGTMSE Member Lending Institution after meeting the CGSS eligibility requirements with her Udyam registration.
Documents required for CGTMSE loan application
When applying for a CGTMSE loan, borrowers are required to submit key business and financial documents.
- Business loan application form (of the lending institution)
- Udyam registration certificate
- KYC documents — PAN, Aadhaar, and address proof of the proprietor/partners/directors
- Business registration documents — partnership deed, Certificate of Incorporation, MoA/AoA, as applicable
- Business plan or detailed project report (DPR) with financial projections
- Financial statements — balance sheet and P&L for the last 2-3 years (for existing businesses)
- Bank statements for the last 6-12 months
- Income tax returns for the last 2-3 years
- Quotations or proforma invoices for machinery/equipment to be purchased (for term loans)
- GST registration certificate, where applicable
How to Apply for the CGTMSE scheme
To apply for a CGTMSE loan, you must apply through a Member Lending Institution—not directly to CGTMSE. The process typically involves five steps, beginning with Udyam registration and ending with the lender obtaining the guarantee cover.
- Register your business and obtain Udyam registration. Set up your business as a proprietorship, partnership, LLP, or company and complete Udyam registration to establish MSME status.
- Prepare a business plan or project report. Include your funding requirement, business model, intended use of funds, and financial projections to support your loan application.
- Apply through a Member Lending Institution. Submit your collateral-free business loan application and request CGTMSE cover along with the required documents.
- Complete the lender's appraisal process. The lender assesses your business viability and creditworthiness before sanctioning the loan, if eligible.
- Guarantee cover is obtained and the loan is disbursed. After sanction, the lender registers the loan with CGTMSE, pays the Annual Guarantee Fee, and the guarantee is typically approved within 7–15 working days before the loan is disbursed.
If you are considering a collateral-free business loan, Bajaj Finance, a registered Member Lending Institution, enables eligible borrowers to apply online through a simple application process
Features and benefits of CGTMSE scheme
- Collateral-free credit — borrow up to Rs. 10 crore without pledging property or assets
- No third-party guarantee — the CGTMSE guarantee replaces the need for a personal guarantor
- High guarantee coverage — 75% to 85% of the loan, by borrower category
- Nominal guarantee fee — AGF from just 0.37% per annum for small loans
- Wide sector coverage — manufacturing, services, trade and agro-based micro enterprises
- Flexible facility types — term loans, working capital, and composite credit
- Fee concessions — additional 10% discount for women, SC/ST, ZED-certified and North East/Aspirational District units
- Startup support — DPIIT-recognised startups can access up to Rs. 20 crore under the linked CGSS scheme
- Improved access to finance — first-generation entrepreneurs who lack collateral can still secure institutional credit
Limitations of the CGTMSE Scheme
- Micro and small enterprises only — medium enterprises are not covered
- Cap on guarantee — only up to Rs. 10 crore is covered; amounts above this carry no guarantee
- AGF is an additional cost — the guarantee fee adds to the overall cost of the loan (if passed on by the lender)
- Sanction still depends on creditworthiness — the guarantee does not bypass the lender's credit appraisal
- Excluded facilities — crop loans, SHG loans, education and housing loans are not covered
- Borrower liability is unchanged — the guarantee protects the lender; the borrower must still repay in full
CGTMSE vs CGFMU
CGTMSE is frequently confused with CGFMU (Credit Guarantee Fund for Micro Units), which guarantees Mudra loans. They are different schemes:
| Aspect | CGTMSE | CGFMU |
|---|
| Full form | Credit Guarantee Fund Trust for Micro and Small Enterprises | Credit Guarantee Fund for Micro Units |
| Covers | MSE business loans up to ₹10 crore | Mudra (PMMY) loans up to Rs. 20 lakh |
| Set up by | Ministry of MSME + SIDBI | Government of India, managed by NCGTC |
| Typical borrower | Established micro and small enterprises | Micro and very small businesses, first-time borrowers |
| Loan size | Larger (up to Rs.10 crore) | Smaller (up to Rs. 20 lakh) |
Difference between CGTMSE loan and MSME loan
| Aspect | CGTMSE-backed loan | Regular MSME/Business loan |
|---|
| Collateral | Not required (CGTMSE guarantees the loan) | May require collateral, especially for larger amounts |
| Guarantee fee | Annual Guarantee Fee (AGF) applies | No guarantee fee |
| Loan limit | Up to Rs. 10 crore (guaranteed portion) | Up to the lender's unsecured limit |
| Approval speed | Slower — involves CGTMSE registration | Faster — often within a couple of days for unsecured NBFC loans |
| Best for | Businesses without collateral needing larger guaranteed credit | Businesses wanting speed and simplicity within the unsecured limit |
Additional Reading: Udyogini Scheme
Additional Reading: ECLGS Scheme
Bottom line
CGTMSE is the Government of India's flagship mechanism for collateral-free MSME credit. The 2026 scheme guarantees loans up to Rs. 10 crore for standard micro and small enterprises (and up to Rs. 20 crore for DPIIT-recognised startups under CGSS), covers 75% to 85% of the loan amount, and charges a nominal Annual Guarantee Fee starting at 0.37% per annum following the 1 April 2025 revision. The borrower applies through a Member Lending Institution, not to CGTMSE directly, and the guarantee protects the lender — the borrower's full repayment obligation remains.
Helpful resources and tips for business loan borrowers
