If you are a MSME business owner, the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is one scheme you should know of and leverage. The CGTMSE scheme was launched in 2000 and provides eligible Member Lending Institutions (MLIs) with a credit guarantee to offer collateral-free business loans to Micro and Small Enterprises (MSEs).

The CGTMSE credit guarantee ceiling was initially set at ₹2 crore but was increased to ₹5 crore from April 2023 and subsequently raised to ₹10 crore from April 1, 2025, to support the growing credit and financing needs of micro and small enterprises.

What is CGTMSE Scheme?

CGTMSE scheme full form is Credit Guarantee Fund Trust for Micro and Small Enterprises. It is an initiative of the Government of India (GoI) and SIDBI to facilitate access to institutional credit for eligible Micro and Small Enterprises (MSEs). The scheme is implemented through eligible Member Lending Institutions (MLIs), including banks and other eligible financial institutions.

The objective of the Credit Guarantee Scheme (CGS) is to enable micro and small businesses (MSEs) and new entrepreneurs to avail collateral-free loans to set up their enterprises and grow. It also aims to make it easier for the under-served and unserved to gain access to funds and facilitates credit flow to the MSE sector.

What is meant by credit guarantee?

When borrowers apply for loans, lending institutions usually ask for collateral as security or a third-party guarantor to back the borrower. This reduces the risks in case the borrower defaults.

This is often difficult for small business owners who often lack asset support (e.g., land, property etc.) for collateral loans.

The Credit Guarantee Scheme was launched to ease this challenge. Under this scheme, when an eligible MLI provides credit to a borrower, it is backed by the scheme and provides credit guarantee coverage of up to 90% of the eligible credit facility, depending on the category of borrower and applicable scheme provisions. The maximum credit facility eligible for guarantee coverage has been increased to ₹10 crore from April 1, 2025. This reduces the lender’s credit risk and can improve access to collateral-free business loans for eligible MSEs.

Note: The scheme is applicable for micro and small enterprises (MSEs) as per the new MSME classification based on annual turnover and investment in plant and machinery.

Also read: Jan Samarth portal: Loan details, registration, login, how to apply

What is the maximum limit in CGTMSE?

The maximum credit facility covered under the CGTMSE scheme is ₹10 crore per borrower for eligible credit facilities provided by Public Sector Banks, Private Sector Banks, Foreign Banks, and select Financial Institutions. This enhanced ceiling applies to guarantees approved on or after April 1, 2025. The credit can be provided by a single MLI or by multiple lenders jointly or separately, subject to the applicable ceiling of the individual MLI. For Small Finance Banks (SFBs), Regional Rural Banks (RRBs), State Financial Institutions, and eligible cooperative banks, the ceiling is ₹2 crore, while Microfinance Institutions (MFIs) have a ₹50 lakh ceiling.

Salient features of Credit Guarantee Scheme

In FY 2025, CGTMSE approved 27,15,275 guarantees amounting to ₹3,05,507 crore across its guarantee schemes. Under CGS-I specifically, 23,26,645 guarantees amounting to ₹2,46,514 crore were approved during FY 2025. Cumulatively, as of March 31, 2025, CGTMSE had approved guarantees worth ₹9,34,871 crore across its three guarantee schemes. These are the latest full-year figures published by CGTMSE as of 2026.

On that note, let us take a look at the latest CGTMSE scheme details and key features:

• Credit facility limit: Credit facilities of up to ₹10 crore per borrower can be covered under CGTMSE through eligible MLIs, subject to the applicable MLI-specific ceiling. The limit is ₹2 crore for SFBs, RRBs, State Financial Institutions, and eligible cooperative banks, and ₹50 lakh for MFIs.
• CGTMSE scheme loan interest rate: CGTMSE does not prescribe a single interest rate for borrowers. The lending institution determines the interest rate in accordance with applicable RBI guidelines and its internal credit assessment. Credit facilities with interest charged as per RBI guidelines are eligible for coverage under the scheme.
• Credit guarantee coverage: For guarantees approved on or after April 1, 2025, coverage ranges from 75% to 90%, depending on the borrower category and credit facility amount. Women entrepreneurs and MSEs promoted by Agniveers can receive up to 90% coverage, while the standard coverage for other borrowers is generally 75%. Certain categories, including SC/ST entrepreneurs, MSEs in Aspirational Districts, ZED-certified MSEs, persons with disabilities and transgender entrepreneurs are eligible for enhanced coverage.
• Eligible Member Lending Institutions (MLIs): Eligible MLIs include scheduled commercial banks, selected RRBs, NBFCs, Small Finance Banks, eligible cooperative banks, Microfinance Institutions, and other institutions specified by the Government of India/CGTMSE. As of March 31, 2025, 276 MLIs were registered under CGS-I and CGS-II.
• CGTMSE scheme eligibility: New and existing micro and small enterprises (MSEs) engaged in eligible manufacturing or service activities can be covered under CGTMSE. Retail and wholesale trading activities are also eligible, subject to the scheme’s conditions. Educational and training institutions are also eligible. Agriculture, Self Help Groups (SHGs), and Joint Liability Groups (JLGs) are excluded under the standard scheme.
• Collateral requirements: CGTMSE supports eligible credit facilities without collateral security and/or third-party guarantees. However, the Hybrid Security option allows an MLI to take collateral for part of the credit facility, while the remaining unsecured portion can receive CGTMSE guarantee cover, subject to the scheme’s limits.

For the latest updates on CGTMSE scheme eligibility, loan limits, guarantee coverage, guarantee fees, and other benefits, visit the CGTMSE website. CGTMSE itself does not provide loans or financial assistance directly; the loan is sanctioned by an eligible MLI, which subsequently obtains the applicable guarantee cover from CGTMSE.

CGTMSE criteria for coverage

In this section, we take a look at the extent of guarantee coverage that is provided to MSEs under the CGTMSE scheme.

The maximum extent or coverage criteria is based on:

• The credit facility amount being covered
• The category or type of borrower
• The location of the MSE/unit
• Other eligible categories, such as ZED-certified MSEs, MSEs in Aspirational Districts, and MSEs promoted by Agniveers.

Let’s take a look at the latest CGTMSE guarantee coverage criteria:

*For more details on the Terms and Conditions, eligibility and borrow obligations please check details on www.cgtmse.in

An additional 5% guarantee coverage is available for MSEs located in Identified Credit Deficient Districts (ICDDs) identified by the RBI, over and above the applicable coverage. For example, 75% coverage becomes 80%, 80% becomes 85%, and 85% becomes 90%, subject to the applicable scheme conditions.

Note: The guarantee coverage refers to the amount in default, subject to the applicable maximum coverage percentage and other CGTMSE conditions. The ₹10-crore ceiling refers to the maximum credit facility that can be covered under the applicable CGTMSE framework; it does not mean that CGTMSE pays 75%–90% of the entire sanctioned loan in every case.

Also read: CETPs MSME scheme – Benefits, guidelines, documents, eligibility

Quick notes:

• The Annual Guarantee Fee (AGF) structure was revised effective April 1, 2025. The standard AGF now starts at 0.37% for credit facilities up to ₹10 lakh, while the rates for higher slabs have been reduced compared with the earlier ₹5-crore structure.

These standard rates apply to guarantees approved or renewed on or after April 1, 2025. The AGF is charged on the guaranteed amount for the first year and on the outstanding amount for subsequent years, subject to CGTMSE rules. MLIs may also receive applicable risk-based discounts or premiums.

• The threshold for waiver of legal action for claim lodgement was increased from ₹5 lakh to ₹10 lakh. This means legal action is not required for the first claim where the applicable aggregate outstanding amount considered for claim settlement is up to ₹10 lakh, subject to CGTMSE conditions.
• MLIs can opt for single-instalment claim settlement where the legal-action waiver applies, with the guarantee coverage reduced by 15%. For example, 75% coverage becomes 60% and 80% becomes 65%. Alternatively, the existing two-instalment settlement process can be followed.
• A 10% concession in the applicable guarantee fee is available for women entrepreneurs, SC/ST entrepreneurs, Persons with Disabilities and MSEs promoted by Agniveers.
• A 10% concession is available for eligible units in the North-Eastern Region (including Sikkim) and the UTs of Jammu & Kashmir, and Ladakh, subject to the applicable ₹50-lakh condition for the fee concession. A 10% concession is also available for MSEs located in Aspirational Districts.
• ZED-certified MSEs are eligible for a 10% concession in the applicable guarantee fee.
• An MSE qualifying under all three concession categories (social, geographic and ZED/eligible MSE-status categories) can receive a maximum 30% discount on the standard guarantee fee rate.
• The applicable AGF can also vary based on the risk classification of the MLI. CGTMSE provides a 10% discount for eligible MLIs with the applicable discount classification, while risk premiums of up to 70% may apply to other MLIs.

Note: Apart from the CGTMSE scheme, women and SC/ST entrepreneurs may also be eligible for other government-backed financing schemes, subject to the scheme’s current eligibility requirements. For example, you can read about the Stand-Up India scheme and business loan schemes for women entrepreneurs

What is the annual guarantee fee in CGTMSE?

There are some fees associated with the CGTMSE scheme. One such CGTMSE fee is the Annual Guarantee Fee (AGF), which is charged for the guarantee cover provided to eligible credit facilities.

The AGF is charged on the guaranteed amount for the first year and on the outstanding amount for the remaining tenure of the credit facility. The revised fee structure applies to guarantees approved or renewed on or after April 1, 2025, including eligible enhancements to existing working capital accounts.

Here’s a snapshot of the CGTMSE Annual Guarantee Fee (AGF) structure applicable as of 2026:

What is the eligibility for a loan under CGTMSE scheme?

The next obvious question is – Who is eligible for the CGTMSE scheme loan?

As mentioned earlier, new and existing micro and small enterprises (MSEs) engaged in manufacturing or service activities are eligible for CGTMSE coverage, subject to the scheme’s conditions. Retail and wholesale trade activities are also eligible for coverage. Small road and water transport operators are also eligible. Educational and training institutions are eligible under the scheme.

However, agricultural activities, Self-Help Groups (SHGs), and Joint Liability Groups (JLGs) are excluded from coverage under the standard CGTMSE scheme.

Note: Businesses involved in the agro-sector can check the ASPIRE scheme details to avail funding for their business.

Documents required for CGTMSE loan application

To apply for a business loan covered under the CGTMSE scheme, borrowers need to submit documents required by the Member Lending Institution (MLI), such as a bank, NBFC, or eligible financial institution. CGTMSE itself does not directly sanction loans or provide subsidies to borrowers. The MLI assesses the loan application and, after sanction/disbursement, applies to CGTMSE for the applicable guarantee coverage.

The documents commonly required for a CGTMSE-backed business loan application may include:

• Loan application form prescribed by the bank/NBFC or other MLI, duly filled and signed.
• Udyam Registration Number/certificate, which is mandatory for new CGTMSE guarantee applications.
• PAN and KYC documents of the borrower, proprietor/partners/directors/promoters, as applicable.
• Business registration or incorporation documents, as applicable (learn about micro business registration process).
• Business/project report, including details of the proposed business, project cost, funding requirement, and projected financials.
• Financial statements and income-tax/GST-related documents, wherever applicable, particularly for existing businesses.
• Bank statements and other documents required for credit assessment.
• Details of the proposed primary security/assets, as applicable.
• Sanction letter or other loan-related documents issued by the MLI, as required during the guarantee coverage process.

The exact document list varies by lender, type of business, loan amount, constitution of the enterprise, and the nature of the credit facility. The MLI is responsible for assessing the borrower’s creditworthiness and submitting the guarantee application to CGTMSE.

Note: The Udyam Registration Number is mandatory for every borrower and must be entered by the MLI when submitting a new guarantee application. CGTMSE’s current guidance also states that PAN is required before availing the credit facility, with specific relaxation in CGTMSE’s insistence for facilities up to ₹5 lakh.

Also read: CGTMSE new member registration process – How MLIs can register as a lender under CGTMSE

How to get a business loan under CGTMSE scheme?

If you want to apply for a business loan covered under the CGTMSE scheme, there are some steps you need to follow. CGTMSE does not directly provide loans to businesses; instead, eligible Member Lending Institutions (MLIs) sanction the credit facility and obtain guarantee coverage from CGTMSE.

• If you are an existing business, ensure you have all your business registration documents, financial statements, tax records, bank statements, and other documents required by the lender in one place.
• If you are a new business (e.g., One-person company, sole proprietorship, limited liability partnership, etc.), ensure your business has the applicable registration, Udyam Registration, taxation, and other statutory details in place.
• You will then have to prepare a business plan or business project report, where required by the lender. In general, a business plan contains details about your products/services, marketing strategies, expansion plans, financial forecasts, management team, competitors, customers, market research, and more.
• Once the business plan is ready, submit it along with the loan application and supporting documents to an eligible MLI for credit assessment.
• You will next have to identify a CGTMSE-eligible lender, such as an eligible bank, NBFC, RRB, Small Finance Bank, or other participating financial institution. The choice of MLI and the credit facility offered are subject to the lender’s policies and eligibility criteria.
• Once the lending institution has received your loan application, it will conduct its normal credit appraisal and verify the applicant’s business, financial position, repayment capacity, and other relevant details. CGTMSE guarantee coverage does not replace the lender’s credit assessment or guarantee loan approval.
• If the lender is satisfied with the application, the credit facility is sanctioned according to the lender’s policies. The MLI then submits the eligible credit facility to CGTMSE for guarantee coverage, as per the applicable scheme requirements.
• Once the guarantee is approved, the applicable Annual Guarantee Fee (AGF) and other charges are payable as prescribed under the CGTMSE framework. The standard AGF currently starts at 0.37% p.a. for credit facilities up to ₹10 lakh, with higher rates applying to larger credit slabs and applicable discounts or risk premiums. The actual amount payable by the borrower depends on the lender’s terms and how the applicable CGTMSE charges are passed on.

Note: There are other government start-up business loans that may be available depending on the nature, stage, and eligibility of the business if CGTMSE-backed credit is not suitable.

Which banks provide CGTMSE?

There are public sector banks, private sector banks, foreign banks, regional rural banks (RRBs), Small Finance Banks (SFBs), cooperative banks, and other eligible financial institutions that provide credit facilities covered under the CGTMSE scheme. Eligible NBFCs and Microfinance Institutions (MFIs) are also registered as Member Lending Institutions (MLIs).

The CGTMSE MLI network includes institutions through which eligible MSE borrowers can access term loans and working capital facilities with applicable guarantee coverage. The current CGTMSE MLI list includes 12 public sector banks, 22 private sector banks, 26 RRBs, 7 foreign banks, 11 SFBs, 10 financial institutions, 19 scheduled urban cooperative banks, 140 other cooperative banks, and 5 MFIs. The exact list can change as institutions are added or removed.

We have covered a full list of participating institutions here – Explore the Bank list providing the loan

Success of CGTMSE scheme in India

The CGTMSE scheme has become an important credit-guarantee mechanism for improving institutional credit access for micro and small enterprises (MSEs). The Government of India also increased the CGTMSE corpus by ₹9,000 crore in 2023 to support the expansion of guarantee coverage and facilitate additional collateral-free credit to MSEs.

The scheme has since undergone further revisions. From April 1, 2025, the maximum credit facility eligible for guarantee coverage under the applicable CGTMSE framework was increased from ₹5 crore to ₹10 crore per borrower. The scheme also provides for guarantee coverage through multiple eligible MLIs, subject to the applicable MLI-specific limits and scheme conditions.

The scheme has also expanded its MLI network and continues to support credit delivery through banks, NBFCs, financial institutions, RRBs, SFBs, cooperative banks, and MFIs, subject to their eligibility and registration with CGTMSE.

Note: CGTMSE does not directly provide loans, subsidies, or financial assistance to businesses. The borrower approaches an eligible MLI, which conducts the credit assessment, sanctions/disburses the loan, and subsequently applies to CGTMSE for the applicable guarantee cover.

Latest update from Union Budget 2026:

Date: 1 Feb 2026

• A ₹10,000 crore SME Growth Fund has been announced to support and scale high-potential MSMEs, with the objective of helping enterprises expand and become future-ready. An additional ₹2,000 crore has also been allocated to the Self-Reliant India Fund to provide continued risk-capital support to micro enterprises.
• The MSME classification limits announced in Union Budget 2025 continue to apply: the investment limit for micro enterprises increased from ₹1 crore to ₹2.5 crore, while the turnover limit increased from ₹5 crore to ₹10 crore. For small enterprises, the limits increased to ₹25 crore investment and ₹100 crore turnover, while medium enterprises now have limits of ₹125 crore investment and ₹500 crore turnover.
• The ₹5 lakh credit card facility for micro enterprises registered on the Udyam portal, announced in Union Budget 2025, remains a key MSME credit initiative. The original announcement provided for 10 lakh such cards in the first year.
• The first-time entrepreneur scheme announced in Union Budget 2025 provides term loans of up to ₹2 crore for 5 lakh first-time entrepreneurs, including women and entrepreneurs from Scheduled Castes and Scheduled Tribes, over five years.
• The CGTMSE credit guarantee ceiling for micro and small enterprises was increased from ₹5 crore to ₹10 crore from April 1, 2025, following the Union Budget 2025 announcement. This remains applicable in 2026.

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