CGTMSE Scheme: Full Form, Guarantee Fee & Collateral-Free Loan Up to ₹10 Crore (2026)

What is CGTMSE?

CGTMSE — the Credit Guarantee Fund Trust for Micro and Small Enterprises — is a trust set up by the Government of India and SIDBI to make bank credit reachable for MSMEs without collateral. When a bank lends to your business on the project’s merits rather than on property or a third-party guarantee, CGTMSE gives the bank a guarantee that covers a large share of the loan if you default.

In plain terms: you are the one who borrows, but the guarantee is for the bank. Because the bank’s risk is largely covered, it can say yes to credit that would otherwise be rejected for lack of collateral — term loans, working capital, even letters of credit and bank guarantees.

How does a CGTMSE loan work?

The flow is simple from a borrower’s point of view, because you never deal with the Trust directly — the bank does.

1. You apply to your bank for a term loan and/or working capital without collateral.
2. The bank sanctions the facility on the strength of your project and track record.
3. The bank files the guarantee with CGTMSE and pays the Annual Guarantee Fee.
4. If you default, CGTMSE reimburses the bank a defined share of the defaulted amount.
5. You keep running your business with clean, unsecured credit behind you.

Because the guarantee exists, the bank is comfortable lending unsecured. The practical benefit to you is a collateral-free loan that you could not have got on the same terms otherwise — and, increasingly, a lower overall cost than collateral-linked borrowings.

CGTMSE loan limit: how much can you get?

The headline limit is ₹10 crore of guaranteed credit per borrower, applicable across all member lending institutions combined. The table below shows what is covered.

The guarantee follows the loan for its full tenure, as long as the Annual Guarantee Fee is paid every year. And if your needs cross ₹10 crore, the Hybrid Security product lets the bank take collateral for one part of the facility while the rest — up to ₹10 crore — stays under the guarantee.

What does CGTMSE guarantee?

CGTMSE does not cover the full loan — it covers a share of the amount that goes into default. That share is what lets banks lend unsecured.

• 75–85% of the amount in default, depending on the loan size and borrower category.
• The higher 85% band applies to the smallest micro loans and to priority categories such as women-led enterprises.
• Larger facilities are generally covered at 75% — on a fully covered ₹10 crore facility, CGTMSE’s maximum exposure is ₹7.5 crore.
• Coverage runs for the agreed tenure of the facility, provided the guarantee fee is paid annually.

Facilities that are already NPA cannot be brought under the scheme, and interest is charged as per RBI guidelines with no special ceiling for covered loans.

CGTMSE eligibility: who can apply?

Eligibility follows the definition of a micro or small enterprise — with a Udyam registration as the practical starting point.

• New or existing micro and small enterprises in manufacturing, services or trade.
• Proprietorships, partnerships, companies, LLPs, Self-Help Groups, societies and trusts.
• Valid Udyam registration is required for coverage.
• Retail and wholesale trade are now covered on the same terms as other activities.

Not eligible: medium enterprises, and credit facilities already backed by collateral or a third-party guarantee (unless structured under the Hybrid Security product).

CGTMSE guarantee fee: the Annual Guarantee Fee (AGF)

The fee is the price of the guarantee — a small annual percentage charged on the covered amount, revised downwards from 1 April 2025 to make guarantee-backed credit cheaper. The standard rate is the same across all activities, including trading.

The AGF is charged on the guaranteed amount in the first year and on the outstanding amount for the remaining tenure of the facility. A 10% concession is available to each of three categories: social (women, SC/ST, persons with disability, Agniveers, transgender persons), geographic (North East incl. Sikkim, J&K and Ladakh up to ₹50 lakh, aspirational districts and credit-deficient districts), and ZED-certified units.

CGTMSE for exporters and importers

This is where CGTMSE overlaps with trade. Because non-fund based facilities are covered, the letters of credit and bank guarantees that your bank issues for your export or import orders can sit under the same collateral-free umbrella as your term loan and working capital.

For an exporter, that combination matters: CGTMSE secures the bank’s exposure on your trade facilities, while products like export factoring and LC discounting turn your shipped invoices and LCs into cash days after shipment. The two work on different layers — the bank’s risk sits with CGTMSE, and your receivables are financed against the actual trade. Importers similarly get LC and bank-guarantee cover without pledging collateral, alongside multicurrency accounts and cross-border payments for the supplier side.

CGTMSE vs PMEGP: which one is for you?

The two schemes are often confused, but they answer different questions. CGTMSE is not a loan — it is the guarantee behind a bank loan, for any existing or new micro or small enterprise. PMEGP is a loan-and-subsidy scheme that funds a brand-new unit, and PMEGP loans above ₹10 lakh are themselves backed by the CGTMSE guarantee.

• Starting a new unit and want subsidy + a loan: look at PMEGP first.
• Running an enterprise and need collateral-free term loans or working capital: approach your bank under CGTMSE.
• Need LC or bank-guarantee cover for trade: that is CGTMSE territory.
• Both schemes require Udyam registration.

Frequently asked questions