CGTMSE lets a bank lend to a micro or small enterprise without collateral or third-party guarantee, because the Trust guarantees a share of the loss. It is not a subsidy and no money reaches the borrower — what it changes is whether the bank can say yes, and what it costs you in annual fee. The rates below apply to guarantees approved on or after 1 April 2025.
At a glance
| What it is | A credit guarantee, not a grant. The Trust reimburses the lender a share of the loss on default; the borrower still owes the debt. |
| Administered by | Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) |
| Who applies | Your bank, not you. Member Lending Institutions apply for cover — you cannot approach the Trust directly. |
| Maximum guarantee | ₹10 crore per borrower, on outstanding credit facilities, irrespective of activity including trading |
| Security condition | Extended without collateral security and/or third-party guarantee |
| Tenure | Runs from the guarantee start date; for working capital, 5 years or a block of 5 years |
| Source | Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS-I), scheme document updated as on 1 April 2025 |
Check these before you approach the bank
Extent of guarantee coverage
For guarantees approved on or after 1 April 2025. Coverage is the share of the loss the Trust bears — not the share of the loan that is guaranteed against you.
| Category of borrower | Up to ₹5 lakh | Above ₹5 lakh to ₹50 lakh | Above ₹50 lakh to ₹10 crore |
|---|---|---|---|
| Micro Enterprises | 85% | 75% | 75% |
| MSEs in North East Region, UT of Jammu & Kashmir, UT of Ladakh | 85% | 75% | 75% |
| Women entrepreneurs / MSEs promoted by Agniveers | 80% | 75% | |
| SC/ST entrepreneurs, Persons with Disability, MSEs in Aspirational Districts, ZED-certified MSEs, Transgender entrepreneurs | 90% | 85% | |
| All other categories of borrower | 75% | ||
The district uplift worth checking first
MSEs located in Identified Credit Deficient Districts as notified by RBI get an additional 5% over and above the applicable coverage, with effect from 15 December 2023. So 75% becomes 80%, 80% becomes 85%, and 85% becomes 90%. Whether your district is on that list is a one-minute check that can move the lender's risk view materially.
Annual Guarantee Fee
Charged on the guaranteed amount in the first year, and on the outstanding amount for the remaining tenure. Standard rates apply across all activity including trading. Rates are percentages per annum.
| Credit facility | Standard rate | After discount (−10%) | +15% risk premium | +30% | +50% | +70% |
|---|---|---|---|---|---|---|
| 0 – ₹10 lakh | 0.37 | 0.33 | 0.43 | 0.48 | 0.56 | 0.63 |
| Above ₹10 – 50 lakh | 0.55 | 0.50 | 0.63 | 0.72 | 0.83 | 0.94 |
| Above ₹50 lakh – ₹1 crore | 0.60 | 0.54 | 0.69 | 0.78 | 0.90 | 1.02 |
| Above ₹1 – 2 crore | 0.85 | 0.77 | 0.98 | 1.11 | 1.28 | 1.45 |
| Above ₹2 – 5 crore | 1.00 | 0.90 | 1.15 | 1.30 | 1.50 | 1.70 |
| Above ₹5 – 8 crore | 1.10 | 0.99 | 1.27 | 1.43 | 1.65 | 1.87 |
| Above ₹8 – 10 crore | 1.20 | 1.08 | 1.38 | 1.56 | 1.80 | 2.04 |
Your fee depends on your lender, not only on you
The risk-premium columns are applied by reference to the lending institution's portfolio performance — NPA rate, claim history and similar factors — not your own credit behaviour. A borrower with an identical proposal can pay materially more at one bank than another. If the fee quoted looks high for your slab, it is worth asking which premium band your MLI sits in before accepting it.
How the ₹10 crore cap is measured
- Fully disbursed term loans — the outstanding as on the date of considering fresh coverage.
- Partially disbursed term loans — the entire sanctioned amount, not the drawn portion. If the lender cancels the undrawn part, it must update the CGTMSE portal.
- Working capital limits — the total sanctioned limit, irrespective of utilisation.
Because the cap runs on outstandings, headroom is released as exposure reduces — a borrower can take incremental cover later, up to the ₹10 crore ceiling.
Where cover is lost or refused
- The facility was restructured, or sat in SMA-2, within the year before application.
- The account is not standard and regular on the material date.
- A facility above ₹50 lakh that the lender's internal rating does not place at investment grade.
- Collateral security or a third-party guarantee has been taken on the same facility.
- Total outstanding cover across facilities already at the ₹10 crore cap.
- Assuming the entire sanction of a partly-drawn term loan does not count toward the cap — it does.
- Annual guarantee fee not paid, or paid late, against the material date.
Interaction with State schemes
CGTMSE is the security layer, not an incentive. It sits underneath State schemes rather than competing with them — a Rajasthan unit can hold CGTMSE cover on its term loan while claiming interest subvention under RIPS 2024 and margin money under ODOP on the same project, because those operate on different heads. Several State schemes also reimburse the guarantee fee itself; whether yours does is worth establishing before you budget for it.
Source: Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS-I), Credit Guarantee Fund Trust for Micro and Small Enterprises — scheme document updated as on 1 April 2025.