What is CGTMSE?
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a trust established by the Ministry of Micro, Small and Medium Enterprises (MSME), Government of India, and the Small Industries Development Bank of India (SIDBI). The scheme was launched on August 30, 2000, to facilitate collateral-free credit to the micro and small enterprise sector.
CGTMSE addresses one of the biggest challenges faced by MSMEs - lack of collateral for securing loans. By providing credit guarantees to lending institutions, the scheme enables banks to provide loans to MSMEs without insisting on third-party guarantee or collateral security.
Objectives of CGTMSE
- • Facilitate collateral-free credit to micro and small enterprises
- • Strengthen credit delivery system for MSMEs
- • Reduce financial risk for lending institutions
- • Encourage first-generation entrepreneurs to set up enterprises
- • Increase flow of credit to underserved MSME segments
Key Features of CGTMSE
Maximum Loan Coverage
Up to ₹5 crore per eligible borrower can be covered under the scheme
No Collateral Required
Banks cannot insist on collateral for loans covered under CGTMSE
Both Term & Working Capital
Covers both term loans for equipment and working capital requirements
Wide Network
Available through all scheduled commercial banks, RRBs, and select NBFCs
Eligibility and Coverage
CGTMSE covers a wide range of MSMEs engaged in manufacturing and service activities:
Eligible Entities
New Enterprises
New micro and small enterprises including proprietary firms, partnerships, LLPs, private limited companies, and cooperatives setting up new units.
Existing Enterprises
Existing MSMEs undertaking expansion, modernization, technology upgradation, or adding new product lines.
Retail Trade
Retail trade enterprises are also eligible subject to certain conditions and limits.
Eligible Activities
Manufacturing
- • All manufacturing activities
- • Processing industries
- • Food processing
- • Textile manufacturing
- • Engineering goods
Services
- • Professional services
- • IT and ITES
- • Healthcare services
- • Educational services
- • Tourism and hospitality
Exclusions
The following are generally not eligible for CGTMSE coverage:
- • Educational institutions (schools, colleges)
- • Self-help groups (SHGs)
- • Training institutions (unless vocational)
- • Activities specifically prohibited by RBI
- • Loans against FDs, LIC policies, or existing collateral
Guarantee Coverage Structure
CGTMSE provides varying levels of guarantee coverage based on the category of the borrower and loan amount:
Coverage Based on Borrower Category
| Category | Guarantee Coverage | Maximum Amount |
|---|---|---|
| New Enterprises (Micro) | 85% | ₹1.05 crore |
| New Enterprises (Small) | 75% | ₹3.75 crore |
| Women Entrepreneurs | 80% | ₹4.00 crore |
| NER, J&K, Ladakh, A&N | 80% | ₹4.00 crore |
| Existing Enterprises | 75% | ₹3.75 crore |
| Retail Activity | 50% | ₹2.50 crore |
* Maximum guarantee coverage per borrower is ₹5 crore under specific schemes
Coverage Based on Loan Amount
Up to ₹10 Lakhs
Maximum guarantee coverage up to 85% for micro enterprises
₹10-50 Lakhs
Coverage up to 75% depending on borrower category
₹50 Lakhs - ₹5 Crore
Coverage available up to specified limits
Application Process
The CGTMSE application process is primarily handled by the lending institution. Here's how it works:
Step 1: Prepare Your Business Plan
Develop a comprehensive project report including business model, financial projections, market analysis, and fund requirements.
Step 2: Approach Eligible Bank
Contact any scheduled commercial bank, regional rural bank, or eligible NBFC that participates in the CGTMSE scheme.
Step 3: Submit Loan Application
Submit your loan application along with required documents. Explicitly mention that you want CGTMSE coverage.
Step 4: Bank Evaluation
The bank evaluates your application, conducts due diligence, and decides on loan sanction.
Step 5: CGTMSE Application by Bank
After sanctioning the loan, the bank applies for CGTMSE guarantee cover online through the CGTMSE portal.
Step 6: Guarantee Approval
CGTMSE reviews the application and approves the guarantee cover. The bank pays the guarantee fee.
Step 7: Loan Disbursement
Once guarantee is approved, the bank disburses the loan amount to your account.
Important Note for Borrowers
As a borrower, you do not directly apply to CGTMSE. Your role is to approach the bank for a loan and request CGTMSE coverage. The bank handles all CGTMSE formalities. However, you should ensure the bank applies for the guarantee cover.
Lending Institutions
CGTMSE coverage is available through a wide network of financial institutions:
Eligible Lending Institutions
Scheduled Commercial Banks
- • Public Sector Banks (SBI, PNB, BoB, etc.)
- • Private Sector Banks (HDFC, ICICI, Axis, etc.)
- • Foreign Banks operating in India
- • Small Finance Banks
Other Institutions
- • Regional Rural Banks (RRBs)
- • Select NBFCs
- • Scheduled Urban Cooperative Banks
- • Small Industries Development Bank (SIDBI)
How to Find Participating Banks
- • Visit the official CGTMSE website: www.cgtmse.in
- • Check the list of member lending institutions
- • Contact your nearest bank branch and inquire about CGTMSE
- • Most public sector banks actively promote CGTMSE loans
- • Private banks also participate, though their focus may vary
Guarantee Fees
CGTMSE charges an annual guarantee fee to the lending institution, which is typically passed on to the borrower. The fee structure is as follows:
Fee Structure
| Loan Amount | Annual Fee Rate |
|---|---|
| Up to ₹10 lakhs | 0.75% per annum |
| Above ₹10 lakhs to ₹1 crore | 1.00% per annum |
| Above ₹1 crore to ₹5 crore | 1.00% per annum |
Special Concessions
- • Women Entrepreneurs: 10% discount on guarantee fee
- • NER, J&K, Ladakh: 10% discount on guarantee fee
- • SC/ST Entrepreneurs: Special fee structure applicable
- • Zone classification: Different rates for different zones
Who Pays the Fee?
The lending institution pays the guarantee fee to CGTMSE. However, the bank typically passes this cost to the borrower by adding it to the interest rate or charging separately. The guarantee fee is usually in the range of 0.75% to 1% per annum on the outstanding loan amount.
Claim Settlement Process
In case of default by the borrower, the lending institution can file a claim with CGTMSE:
Claim Eligibility
- • Account has been classified as NPA (Non-Performing Asset)
- • All recovery proceedings have been initiated
- • Legal notice has been served to the borrower
- • Claim is filed within the stipulated timeframe
Claim Settlement Ratio
First Instalment (75%)
CGTMSE pays 75% of the guaranteed amount within 30 days of claim submission
Second Instalment (25%)
Remaining 25% is paid after recovery proceedings are completed
One-Time Settlement (OTS)
CGTMSE allows One-Time Settlement facility where borrowers can settle their dues at a concessional rate. This helps distressed borrowers close their accounts and start afresh.