CGTMSE Loan Scheme: Collateral-Free Credit for MSME Growth

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CGTMSE Scheme
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2 min read
June 06, 2026

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a Government of India scheme that enables micro and small enterprises to borrow up to Rs. 10 crore without pledging collateral or a third-party guarantee. Set up in August 2000 by the Ministry of Micro, Small and Medium Enterprises and the Small Industries Development Bank of India (SIDBI), the Trust guarantees a portion of the loan to the lender — so banks and NBFCs can extend credit to MSMEs that lack the security a conventional loan would demand.


This guide explains the CGTMSE full form and how the scheme works, the current Rs. 10 crore loan ceiling (Rs. 20 crore for DPIIT-recognised startups under the linked CGSS scheme), the guarantee coverage percentages, the revised Annual Guarantee Fee structure effective 1 April 2025, eligibility, documents, and the step-by-step application process.


2026 update: The maximum CGTMSE guarantee cover has been raised to Rs. 10 crore (from the earlier Rs. 2 crore/Rs. 5 crore limits many sources still show). DPIIT-recognised startups can access cover up to Rs. 20 crore under the Credit Guarantee Scheme for Startups (CGSS). The Annual Guarantee Fee was also revised downward, effective 1 April 2025, per CGTMSE Circular No. 251/2024-25.


CGTMSE Scheme – Highlights

DetailValue
Full formCredit Guarantee Fund Trust for Micro and Small Enterprises
EstablishedAugust 2000
Set up byMinistry of MSME, Government of India + SIDBI
Maximum guarantee coverRs. 10 crore (Rs. 20 crore for DPIIT startups under CGSS)
Maximum credit risk borne by CGTMSERs. 7.5 crore (75% of the Rs. 10 crore cap)
Guarantee coverage75% to 85% of the loan amount, by borrower category
Collateral requiredNone
Third-party guarantee requiredNone
Annual Guarantee Fee (AGF)0.37% to 1.20% per annum (revised w.e.f. 1 April 2025)
Eligible borrowersMicro and Small Enterprises (manufacturing and service); retail/wholesale trade now included
Lending institutionsScheduled commercial banks, RRBs, SFBs, select NBFCs, SFCs (registered as MLIs)
Official websitecgtmse.in

 

What is the CGTMSE scheme?

CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises. It is a trust jointly set up by the Government of India (through the Ministry of MSME) and SIDBI to make collateral-free credit available to micro and small enterprises. The scheme works on a simple principle: the biggest obstacle a small business faces in getting a loan is the lack of collateral. CGTMSE removes that obstacle by acting as a guarantor — if the borrower defaults, the Trust compensates the lender for a defined percentage of the loss.


Because the lender's risk is partly backstopped by the Trust, banks and NBFCs are far more willing to lend to first-generation entrepreneurs and small businesses that would otherwise be turned away. The borrower gets credit without pledging property, gold or other assets; the lender gets protection; and the government achieves its goal of widening credit access to the MSME sector that forms the backbone of the Indian economy.


Note: CGTMSE is often confused with CGFMU (Credit Guarantee Fund for Micro Units), which covers Mudra loans up to Rs. 20 lakh. CGTMSE covers MSE loans up to Rs. 10 crore. They are separate schemes with different limits, different administering bodies, and different eligibility. See the comparison later on this page.

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 typeMaximum guarantee cover
Standard Micro and Small EnterprisesUp to Rs. 10 crore
DPIIT-recognised startups (under CGSS)Up to Rs. 20 crore
Maximum credit risk borne by CGTMSERs. 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:

StepWhat happens
1. Loan applicationA micro or small enterprise applies for a business loan from a CGTMSE Member Lending Institution (bank or NBFC)
2. Loan evaluationThe lender assesses business viability, financial projections and credit profile — without requiring collateral
3. Loan sanctionIf approved, the lender sanctions the collateral-free loan
4. Guarantee coverThe lender registers the loan with CGTMSE and pays the Annual Guarantee Fee to secure cover of 75%-85% of the amount
5. Default protectionIf 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.


CGTMSE guarantee coverage percentage

The percentage of the loan that CGTMSE guarantees depends on the borrower category and the loan amount. Higher coverage is extended to micro enterprises and to priority groups.

Borrower categoryGuarantee coverage
Micro enterprises (up to Rs. 5 lakh)Up to 85%
Women entrepreneurs, SC/ST, Aspirational Districts, North East RegionUp to 85% (with additional fee concessions)
Other Micro and Small Enterprises75% (standard)
Retail and wholesale tradeAs per current scheme bands (aligned with other activities)

Coverage bands are periodically revised by the CGTMSE Trust. Verify the exact percentage applicable to a specific loan on cgtmse.in or with the lender.


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 slabStandard AGF (per annum)
Up to Rs. 10 lakh0.37%
Above Rs. 10 lakh to Rs. 50 lakh0.55%
Above Rs. 50 lakh to Rs. 1 crore0.60%
Above Rs. 1 crore to Rs. 2 crore0.85%
Above Rs. 2 crore to Rs. 5 crore1.00%
Above Rs. 5 crore to Rs. 10 crore1.10% 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:

  1. Term loans: Designed for long-term investments such as purchasing equipment, machinery, or fixed assets.
  2. Working capital loans: Offers funds to support daily business operations and ensure smooth cash flow for business continuity.
  3. Composite loans: Combines term loans and working capital loans, enabling MSEs to address both operational and investment needs with a single loan.
  4. Fund-based facilities: Direct financial assistance in the form of loans or advances for business growth and operational needs, including overdrafts and cash credit.
  5. 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).

CGTMSE scheme eligibility

Eligibility has two layers — the borrower and the lender.

Eligible borrowers

  • New and existing micro and small enterprises (MSEs) as defined under the MSMED Act
  • Engaged in manufacturing or service activities (medium enterprises are not eligible)
  • Retail and wholesale trade enterprises (now included after recent scheme revisions)
  • Enterprises with a valid Udyam registration
  • The credit facility must be 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 — textiles, food processing, engineering, and other small-scale production units
  • Services — IT services, consulting, hospitality, healthcare, and other service providers
  • Trading — retail and wholesale trade of goods (now covered)
  • Agro-based micro enterprises — agricultural processing and marketing (non-crop)
  • Ancillary units and cottage industries

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

You do not apply to CGTMSE directly. The process runs through your lending institution:

Step 1: Establish and register the business entity

Set up the business as a proprietorship, partnership, LLP or company, and obtain Udyam (MSME) registration. CGTMSE cover requires the borrower to be a registered micro or small enterprise.

Step 2: Prepare a business plan/project report

Draft a detailed project report covering the business model, funding requirement, intended use of funds, and financial projections. A strong DPR materially improves the chances of loan sanction.

Step 3: Apply to a Member Lending Institution

Approach a CGTMSE-registered bank or NBFC and apply for a collateral-free business loan, specifically requesting CGTMSE cover. Submit the application with all required documents.

Step 4: Loan sanction by the lender

The lender appraises the application on business viability and creditworthiness — without demanding collateral. If approved, the loan is sanctioned.

Step 5: Securing the guarantee cover

The lender registers the sanctioned loan with CGTMSE and pays the Annual Guarantee Fee. Once the cover is approved, the guarantee is active for the loan tenure. The lender disburses the loan to the borrower.


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:

AspectCGTMSECGFMU
Full formCredit Guarantee Fund Trust for Micro and Small EnterprisesCredit Guarantee Fund for Micro Units
CoversMSE business loans up to ₹10 croreMudra (PMMY) loans up to Rs. 20 lakh
Set up byMinistry of MSME + SIDBIGovernment of India, managed by NCGTC
Typical borrowerEstablished micro and small enterprisesMicro and very small businesses, first-time borrowers
Loan sizeLarger (up to Rs.10 crore)Smaller (up to Rs. 20 lakh)

Difference between CGTMSE loan and MSME loan

AspectCGTMSE-backed loanRegular MSME/Business loan
CollateralNot required (CGTMSE guarantees the loan)May require collateral, especially for larger amounts
Guarantee feeAnnual Guarantee Fee (AGF) appliesNo guarantee fee
Loan limitUp to Rs. 10 crore (guaranteed portion)Up to the lender's unsecured limit
Approval speedSlower — involves CGTMSE registrationFaster — often within a couple of days for unsecured NBFC loans
Best forBusinesses without collateral needing larger guaranteed creditBusinesses 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

Types of Business LoanBusiness Loan EMI CalculatorUnsecured Business Loan
Working Capital LoanMSME LoanMudra Loan
Machinery LoanPersonal Loan for Self EmployedCommercial Loan

Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.
For customer support, call Personal Loan IVR: 7757 000 000

Frequently asked questions

What is the full form of CGTMSE?

The full form of CGTMSE is a credit guarantee fund trust for micro and small enterprises.

What is the CGTMSE charge?

The CGTMSE charges include a one-time guarantee fee and an annual service fee, both of which vary depending on the loan amount and tenure. These charges are typically paid by the borrower.

How is CGTMSE advantageous for business?

The CGTMSE scheme offers several advantages for micro and small enterprises, including access to collateral-free loans, competitive interest rates, extended repayment tenures, and credit guarantees to mitigate risk for lenders. It helps these businesses access the funds they need to grow and prosper, contributing to economic development.

What is the credit limit under CGTMSE?

The credit limit under the CGTMSE scheme is up to Rs. 2 crore per borrower, including term loans and working capital. The credit facility may be extended as cash credit, term loans, or a combination of both. The collateral-free loan under CGTMSE scheme is provided to micro and small enterprises to promote entrepreneurship and facilitate credit flow.

What is the annual guarantee fee in CGTMSE?

The annual guarantee fee in the CGTMSE scheme is 1.5% of the credit facility sanctioned, depending on the loan amount and repayment period. The guarantee fee is payable in advance in one or more instalments and is non-refundable. However, there are some exemptions for the guarantee fee for certain categories of borrowers.

What is the maximum limit of CGTMSE?

The maximum limit of CGTMSE is Rs. 2 crore for both term loans and working capital facilities.

What is the lock-in period in CGTMSE?

The lock-in period in CGTMSE is 18 months from the date of last disbursement or guarantee approval, whichever is later.

Who is eligible for the CGTMSE scheme?

Micro and Small Enterprises, whether newly established or already in operation, involved in manufacturing or service activities, are eligible. This excludes entities engaged in agriculture, Self Help Groups (SHGs), and similar sectors.

Which banks provide the CGTMSE scheme?

Various commercial banks, regional rural banks, and financial institutions participate in the CGTMSE scheme. The list of participating banks and financial institutions are regularly updated on the official CGTMSE website.

Is Mudra loan covered under CGTMSE?

The Mudra Loan Scheme falls under the purview of CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises), offering both term loans and overdraft facilities. In the event of default, the government takes responsibility for loan repayment.

What is the charge required by the CGTMSE for loan up to 5 lakh?

The CGTMSE charges for loans up to Rs. 5 lakh vary based on the sanctioned amount. For credits up to Rs. 5 lakhs, the charge is 0.75% of the sanctioned amount. Meanwhile, for credits exceeding Rs. 5 lakhs but up to Rs. 100 lakh, the charge increases to 0.85%. Additionally, under this scheme, the credit guarantee ranges from 75% to 85% for micro-enterprises, with a tenure of 5 years, providing financial security and support for small-scale borrowers.

What is the lock period for CGTMSE?

The lock period for CGTMSE typically varies depending on the specific terms of the loan agreement between the lender and the borrower. However, generally, the lock period is up to 5 years from the date of disbursement of the credit facility. During this period, the borrower is expected to adhere to the terms of the loan agreement, and any changes or early repayment may be subject to penalties or renegotiation terms specified therein.

What are the benefits of a CGTMSE loan?

CGTMSE loans offer several benefits to micro and small enterprises, including access to collateral-free credit, simplified application procedures, and reduced risk for lenders. Additionally, these loans often come with competitive interest rates and longer repayment tenures, facilitating easier access to funds for business expansion and working capital needs.

Is collateral required for a CGTMSE loan?

No, collateral is not required. The loan is secured under the CGTMSE government credit guarantee.

Who provides loans under the CGTMSE scheme?

Loans are offered through banks and NBFCs registered with CGTMSE. Businesses cannot apply directly to CGTMSE.

What is the guarantee coverage under CGTMSE?

The CGTMSE scheme provides a guarantee of 75%–85% of the loan amount, depending on the lender and loan type.

Can startups apply for a CGTMSE loan?

Yes, startups that qualify as Micro or Small Enterprises and meet other eligibility criteria can apply through a participating lender.

What sectors are excluded from CGTMSE scheme eligibility criteria?

Under the CGTMSE scheme, certain activities are not eligible for coverage. These typically include agriculture-related direct farming activities, retail trading in specified excluded categories, educational institutions, self-help groups, and activities prohibited under law. Speculative, gambling, and certain service sectors may also be excluded as per CGTMSE guidelines.

How long does CGTMSE guarantee approval process usually take?

The CGTMSE guarantee approval is generally processed along with the loan application by the lending institution. Once the loan is sanctioned and submitted to CGTMSE, approval is usually granted within a few days. In most cases, the overall process is completed within 7 to 15 working days, subject to documentation accuracy.

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Disclaimer

1. Bajaj Finance Limited (“BFL”) is a Non-Banking Finance Company (NBFC) and Prepaid Payment Instrument Issuer offering financial services viz., loans, deposits, Bajaj Pay Wallet, Bajaj Pay UPI, bill payments and third-party wealth management products. The details mentioned in the respective product/ service document shall prevail in case of any inconsistency with respect to the information referring to BFL products and services on this page.

2. All other information, such as, the images, facts, statistics etc. (“information”) that are in addition to the details mentioned in the BFL’s product/ service document and which are being displayed on this page only depicts the summary of the information sourced from the public domain. The said information is neither owned by BFL nor it is to the exclusive knowledge of BFL. There may be inadvertent inaccuracies or typographical errors or delays in updating the said information. Hence, users are advised to independently exercise diligence by verifying complete information, including by consulting experts, if any. Users shall be the sole owner of the decision taken, if any, about suitability of the same.
For customer support, call Personal Loan IVR: 7757 000 000