The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a trust set up in 2000 by the Ministry of MSME and SIDBI to make credit available to the micro and small enterprise (MSE) sector without collateral or a third-party guarantee. Instead of mortgaging property or arranging a guarantor, the borrower's loan is backed by a guarantee from the Trust, so a lender can sanction funds on the strength of the business proposal alone.
What the scheme covers
Following the Union Budget 2025 announcement, the ceiling on guaranteed credit was doubled from ₹5 crore to ₹10 crore per borrower with effect from 1 April 2025. The cover applies to both term loans and working capital sanctioned by a registered Member Lending Institution (MLI).
- Collateral-free credit guaranteed up to ₹10 crore per eligible borrower
- Guarantee cover of roughly 75–85% of the amount in default
- Higher cover for micro units, women-led enterprises and borrowers in the North East Region
- Well-run startups can access enhanced cover of up to ₹20 crore at a concessional 1% fee under the separate Credit Guarantee Scheme for Startups (CGSS), administered by NCGTC
Who is eligible
- New and existing micro and small enterprises with a valid Udyam registration
- Units engaged in manufacturing, services and, following recent expansion, trading activity
- Loans to agriculture and to Self-Help Groups (SHGs) are outside the scheme's scope
- The same loan cannot draw the CGTMSE guarantee and another credit guarantee or interest subsidy on the same portion simultaneously
Annual Guarantee Fee
The Annual Guarantee Fee (AGF) is charged upfront in the first year on the sanctioned amount, and from the second year onwards on the outstanding loan balance. The rationalised slabs below apply to guarantees approved on or after 1 April 2025.
| Credit facility | Standard AGF (% p.a.) |
|---|---|
| Up to ₹10 lakh | 0.37% |
| Above ₹10 lakh to ₹50 lakh | 0.55% |
| Above ₹50 lakh to ₹1 crore | 0.60% |
| Above ₹1 crore to ₹2 crore | 0.85% |
| Above ₹2 crore to ₹5 crore | 1.00% |
Women-owned, SC/ST, ZED-certified and North East Region or Aspirational District units receive a further 10% concession on the standard rate. Facilities above ₹5 crore attract a higher slab rate, and the fee is ordinarily recovered from the borrower.
How to avail the guarantee
- Approach any MLI — a scheduled commercial bank, regional rural bank, small finance bank or eligible NBFC — and apply for the loan in the usual way
- The lender appraises the proposal and, on sanction, lodges the guarantee application on the CGTMSE portal
- The AGF is paid and the guarantee cover is activated for that credit facility
- If the account later turns bad, the lender invokes the guarantee after the prescribed lock-in period and files its claim
Points to keep in mind
CGTMSE is a guarantee, not a grant — the borrower still repays the loan in full, and the cover only protects the lender against default. Keep the Udyam registration active, because eligibility is checked against it. Since some banks default to asking for collateral out of habit, borrowers should specifically ask the branch to route the loan under CGTMSE where the facility qualifies.