🛡️ CGTMSE
Credit Guarantee Fund Trust for Micro and Small Enterprises
Overview
CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) is jointly set up by the Ministry of Micro, Small & Medium Enterprises (MSME), Government of India and Small Industries Development Bank of India (SIDBI) (4:1 ratio) to catalyse flow of institutional credit to Micro & Small Enterprises (MSEs).
The Credit Guarantee Scheme (CGS) was launched to strengthen the credit delivery system and facilitate flow of credit to the MSE sector, create access to finance for unserved, under-served and underprivileged, and make finance available from conventional lenders to new generation entrepreneurs.
- Implementing Agency: Jointly by GoI and SIDBI.
- Objective: To support first-generation entrepreneurs in MSE without collateral — providing third-party guarantees to help aspiring entrepreneurs set up units in the Micro and Small sectors.
- Udyam Registration: Mandatory for the borrower unit.
MSME Sector Significance
- 63 million MSMEs provide jobs to 120 million people
- Contribute 45% of manufacturing output and 40% of exports
- Limited access to timely & affordable credit
- Micro enterprises & first-time entrepreneurs struggle the most
Eligible Lending Institutions (as of March 31, 2025)
132 Registered Lending Institutions as MLIs (Member Lending Institutions):
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Overview
CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) is jointly set up by the Ministry of Micro, Small & Medium Enterprises (MSME), Government of India and Small Industries Development Bank of India (SIDBI) (4:1 ratio) to catalyse flow of institutional credit to Micro & Small Enterprises (MSEs).
The Credit Guarantee Scheme (CGS) was launched to strengthen the credit delivery system and facilitate flow of credit to the MSE sector, create access to finance for unserved, under-served and underprivileged, and make finance available from conventional lenders to new generation entrepreneurs.
- Implementing Agency: Jointly by GoI and SIDBI.
- Objective: To support first-generation entrepreneurs in MSE without collateral — providing third-party guarantees to help aspiring entrepreneurs set up units in the Micro and Small sectors.
- Udyam Registration: Mandatory for the borrower unit.
MSME Sector Significance
- 63 million MSMEs provide jobs to 120 million people
- Contribute 45% of manufacturing output and 40% of exports
- Limited access to timely & affordable credit
- Micro enterprises & first-time entrepreneurs struggle the most
Eligible Lending Institutions (as of March 31, 2025)
132 Registered Lending Institutions as MLIs (Member Lending Institutions):
| Type | Count |
|---|---|
| Public Sector Banks | 27 |
| Private Sector Banks | 16 |
| Regional Rural Banks | 8 |
| Foreign Banks | 5 |
| Other Institutions (NSIC, NEDFI, SIDBI, TNIIC) | 4 |
CGTMSE Logo & Identity
- CGTMSE has introduced a new logo: a colorful flying bird
- The bird symbolizes the support to youth with entrepreneurial spirit but lacking collateral or third-party guarantees
- The aim is to transform individuals from job seekers to job providers, thereby aiding in nation building
CGTMSE Schemes — Four Components
| # | Scheme | Description |
|---|---|---|
| 01 | CGS-I | Credit Guarantee Schemes for Banks |
| 02 | CGS-II | Credit Guarantee Schemes for NBFCs |
| 03 | Co-lending | Credit Guarantee Scheme for Co-Lending |
| 04 | PM SVANidhi | Micro-credit for street vendors (separate lesson) |
CGS-I: Credit Guarantee Scheme for Banks
Key Features
The scheme acts as a safety net for lenders. The cap of Rs 10 Crore is the maximum guarantee coverage limit (irrespective of the unit and activity).
A single eligible borrower in the Micro and Small Enterprise sector can avail guarantee cover on credit facilities without any collateral security and/or third party guarantee.
| Parameter | Details |
|---|---|
| Eligible Lenders (MLIs) | Scheduled Commercial Banks (SCBs), RRBs, SFBs, NBFCs, Small Finance Banks, Co-operative Banks, MFIs. |
| Max Guarantee Coverage | Rs 10 Crore per borrower unit. |
| Collateral | Zero. No collateral or 3rd party guarantee is required. |
| Udyam Registration | Mandatory for the borrower unit. |
Maximum Guarantee Amount by Lender Type
| Maximum Guarantee Amount | Eligible Lenders |
|---|---|
| Rs 10 crore | Public Sector Banks, Private Sector Banks, Foreign Banks, Select Financial Institutions |
| Rs 2 crore (Rs 200 lakh) | Small Finance Banks (SFBs), RRBs, State Financial Institutions, Co-operative Banks |
| Rs 50 lakh | Microfinance Institutions (MFIs) |
Eligible Credit Facilities
What kind of loans are covered?
- Fund-Based: Working Capital, Term Loans.
- Non-Fund Based: Letter of Credit, Bank Guarantees.
- Hybrid Security:
- Concept: Generally, CGTMSE covers the entire loan if no collateral is taken.
- Hybrid: If a bank takes collateral for part of the loan, the remaining unsecured part (up to Rs 10 Crore) can still be covered under CGTMSE.
- Investment Grade: For loans above Rs 50 Lakh, the internal rating of the borrower must be "Investment Grade" (i.e., low risk).
Exclusions: Loans already covered under other government-backed risk schemes are not eligible.
Extent of Guarantee Cover
If a loan turns bad (NPA), CGTMSE repays a percentage of the default amount to the bank. This coverage varies by category:
| Category of Borrower | Up to Rs 5 Lakh | Rs 5 Lakh – Rs 50 Lakh | Above Rs 50 Lakh & up to Rs 10 Crore |
|---|---|---|---|
| Micro Enterprises | 85% | 75% | 75% |
| MSEs in North East Region (incl. Sikkim, UT of J&K and UT of Ladakh) | 80% | 80% | — |
| Women entrepreneurs / MSE promoted by SC/ST/PwD/Agniveers | 85% | 80% | — |
| ZED certified MSEs | 85% | 80% | — |
| All Other Categories | 75% | 75% | 75% |
MSEs in Identified Credit Deficient Districts (ICDD): An additional 5% over the existing coverage (i.e., 75% becomes 80%, 80% becomes 85% and so on).
Annual Guarantee Fee (AGF)
AGF is charged on the guaranteed amount for the first year and on the outstanding amount for the remaining tenure of the credit facility.
| Slab | Standard Rate (SR) |
|---|---|
| 0–10 lakh | 0.37% |
| Above 10–50 lakh | 0.55% |
| Above 50 lakh–1 crore | 0.60% |
| Above 1–2 crore | 0.85% |
| Above 2–5 crore | 1.00% |
| Above 5–8 crore | 1.20% |
| Above 8–10 crore | 1.20% |
Concessions / Relaxation in Guarantee Fee
| Category | Eligible Groups / Regions | Loan Amount | Relaxation |
|---|---|---|---|
| Social Category (Weaker/Underserved Section) | Women, SC, ST, Persons with Disability (PwD), Agniveers | No limit | 10% |
| Geographic Target Group | NER (incl. Sikkim), UT of J&K, UT of Ladakh, Aspirational Districts, ICDD | Up to Rs 50 lakh | 10% |
| ZED Certified Enterprises | Enterprises certified under the ZED schema | No Limit | 15% |
Guarantee Coverage Details
- The lender must cover the eligible credit facilities as soon as they are sanctioned
- Guarantee starts from the date of payment of the guarantee fee
- It lasts for the agreed tenure for term loans/composite loans or for 5 years for working capital facilities unless specified otherwise
Guarantee Coverage for an Agniveer
- A 10% relaxation in the Annual Guarantee Fee
- An increased extent of guarantee coverage of 85%, the same as for SC/ST and Women Entrepreneurs
Claim Settlement Process
If a business fails and the loan becomes a Non-Performing Asset (NPA):
Legal Proceedings
For settlement of claims in respect of guarantees for loan outstanding up to Rs 10 Lakh, initiation of legal proceedings will not be required.
Claim Settlement — Two Options (where waiver of legal action applies)
Previously, the claim was settled in two instalments: 75% as the first instalment and the remaining 25% as the second.
Now, two options have been introduced:
Option 1 — Single Instalment (Reduced Coverage):
Single instalment of claim settlement with a reduced guarantee by 15%. For example, a coverage of 75% will be reduced to 63.75%, 80% will be reduced to 68%, and so on.
Option 2 — Two Instalments (Existing Process):
Maintain the existing two-instalment process: 75% of eligible amount as the first instalment & the remaining 25% as the second. For accounts with legal actions, the second instalment will be settled three years after the settlement of the first claim — or at the time of OTS, whichever comes first.
| Aspect | Option 1: Single Instalment | Option 2: Two Instalments |
|---|---|---|
| Method | One-time settlement with reduced coverage | Settlement in two instalments |
| Coverage | Reduced by 15% | Full coverage maintained |
| Disbursement | Entire claim in a single instalment | 75% in 1st; 25% in 2nd |
| Timeframe | Immediate (single payment) | 2nd instalment settled 3 years from 1st claim or OTS |
| Risk Factor | Lower payout but immediate | Higher payout but delayed full recovery |
Claims — Key Rules
- The lending institution may invoke the guarantee within a maximum period of 3 years from the NPA date or lock-in period — whichever is later
- Lock-in Period (The minimum waiting period before a claim can be filed):
- Standard: 18 months from the guarantee start date or the date of last disbursement (whichever is later).
- Exception: Reduced to 9 months for small loans up to Rs 10 Lakh if the total loan tenure is 36 months or less.
- Trust pays 75% of claim within 30 days, rest after recovery or decree
- Accounts classified as Fraud / Wilful defaulter / Non-Co-operative borrower shall not be eligible for Claim Settlement
CGS-II: CGTMSE Coverage on Co-lending for MSEs
A new Credit Guarantee Scheme for Co-lending (CGS-II) was introduced by CGTMSE to offer guarantee coverage for eligible Scheduled Commercial Banks and NBFCs lending to MSEs under the Co-lending model.
Key Features
- All advances covered are "Greenfield" and have no exclusion
- Eligible Pair: Combination of a Scheduled Commercial Bank and an NBFC with a Co-Lending arrangement. Only NBFCs registered with CGTMSE under CGS-I & CGS-II are eligible.
- Lending Institution: Registered NBFCs within the eligible pair will be recognized by the Trust as the main lending institution for CGS-II
- Interest Rate Limit: Facilities with effective interest rates to MSEs up to 18% are eligible
Coverage Amounts
- Max Rs 200 lakh for credit secured by Primary Security
- Max Rs 100 lakh for unsecured credit
Hybrid Security: Physical security obtained can be secured for part of the credit, while the unsecured part, up to Rs 200 lakh, is covered under CGS-II.
Investment Grade: Proposals above Rs 50 lakh should be of this grade.
Agreement Requirement: MLIs need a fresh agreement with the Trust for guarantee enrollment.
Guarantee Fee (Co-lending)
Calculated annually:
| Slab | Fee Rate |
|---|---|
| Up to Rs 5 lakh | 1.00% |
| Rs 5 lakh – Rs 10 lakh | 1.25% |
| Above Rs 10 lakh | 1.50% |
Cumulative fee structure applies for multiple loans to a single customer.
Guarantee Coverage (Co-lending)
- 75% for credits secured by primary security
- 50% for unsecured credits
Payout Cap
- 2 times the total receipts of the previous year paid to CGTMSE by lending institutions
NCGTC — National Credit Guarantee Trustee Company Ltd
NCGTC is a private limited company incorporated under the Companies Act 1956 on March 28, 2014, established by the Department of Financial Services, Ministry of Finance, as a wholly owned company of the Government of India.
Its role: act as a common trustee company for multiple credit guarantee funds.
NCGTC operates as the trustee for schemes such as CGFMU (Credit Guarantee Fund for Micro Units) and other guarantee schemes under various government programmes.
Scheme of Micro Finance Programme
The government recognized that MFIs/NGOs — the "last-mile" lenders for the rural poor — were being held back not by lack of demand, but by inability to provide collateral to borrow from SIDBI. To fix this, the government launched the Micro Finance Programme in 2003-04:
- SIDBI would lend to MFIs/NGOs at scale to on-lend to individuals.
- But SIDBI required a 10% security deposit from borrowers (MFIs/NGOs) before lending.
- MFIs/NGOs in remote/underserved areas simply didn't have this money.
- So the Government stepped in — it deposited funds with SIDBI (called the Portfolio Risk Fund or PRF) to cover most of this security requirement on behalf of such institutions.
NOTE
The Micro Finance Programme via PRF represented the early-stage model (pre-2010). Modern micro-credit coverage is now primarily handled through CGFMU (managed by NCGTC), which operates at a much larger scale.
Security Deposit Structure (How the 10% was split)
When an MFI/NGO wanted a loan from SIDBI, a 10% security deposit was required. This was split as:
| Who Pays | Share | What it means |
|---|---|---|
| MFI/NGO | 2.5% (25% of deposit) | The institution's own "skin in the game" |
| Government (PRF) | 7.5% (75% of deposit) | Covered from the Portfolio Risk Fund created for this purpose |
This de-risked SIDBI's lending, enabling credit flow to MFIs/NGOs in areas that would otherwise be credit-starved.
Historical Impact (Early Stage, as of March 2010)
- Government released Rs 80 crore towards PRF — a seed fund to enable MFIs/NGOs to access SIDBI credit.
- Cumulative loans of Rs 1299.68 crore were disbursed using this leverage, benefiting 20.21 lakh people.
- Over 80% of beneficiaries were women — reflecting the scheme's focus on women-led SHGs and microenterprises.
Current Scale (FY 2023-24)
- CGTMSE approved 17,24,073 guarantees in FY 2023-24
- Total amount: ₹2,02,807 crore (⬆ 94% growth over previous year)
- Cumulative guarantees since inception: ₹6.29 lakh crore (as of March 31, 2024)
Summary Cheat Sheet
| Concept / Topic | Key Details |
|---|---|
| What is CGTMSE? | A trust by GoI + SIDBI to provide collateral-free credit to MSEs. |
| CGTMSE Logo | A colorful flying bird symbolizing entrepreneurial spirit. |
| Max Guarantee Coverage | Up to Rs 10 Crore per borrower unit. |
| Four Schemes | CGS-I (Banks), CGS-II (NBFCs), Co-lending, PM SVANidhi. |
| Collateral Rule | Zero collateral required. Third-party guarantee is also not required. |
| Hybrid Security | Allowed. If collateral covers part of the loan, CGTMSE covers the remaining unsecured part. |
| Guarantee Cover | Micro Enterprises: 85% (up to Rs 5L), 75% (above). Women (w.e.f. 1 Apr 2024): 90%. SC/ST/ZED/Agniveers: 85% (up to Rs 5L), 80% (above). NER: 80%. ICDD: +5% additional. Others: 75%. |
| AGF | Ranges from 0.37% to 1.20%. 10% discount for Women, SC/ST, PwD, Agniveers. 15% discount for ZED. |
| Agniveer | 10% relaxation in AGF + 85% guarantee (same as SC/ST/Women). |
| Lock-in Period | 18 months (or 9 months for loans up to Rs 10L with tenure up to 36 months). |
| Legal Action Waiver | Not mandatory for claims up to Rs 10 Lakh. |
| Claim Options | Option 1: Single instalment, coverage reduced by 15%. Option 2: 75% + 25% (2nd after 3 years). |
| Co-lending (CGS-II) | Max Rs 200L secured / Rs 100L unsecured. 75% cover (secured), 50% (unsecured). Interest rate limit: 18%. |
| NCGTC | Private limited company, incorporated March 28, 2014, common trustee for multiple guarantee funds. |
| Micro Finance Programme | Launched 2003-04, PRF via SIDBI, 80%+ women beneficiaries. (Modern scale: ₹6.29 lakh crore cumulative as of Mar 2024) |
Sources
- CGTMSE Official Website — Scheme details, AGF rates, guarantee cover tables
- CGTMSE Annual Report / FY 2023-24 data — 17.24 lakh guarantees, ₹2.02 lakh crore approved
- CGTMSE Circular No. 241/2024-25 — Women guarantee enhanced to 90% (w.e.f. April 1, 2024)
- MSME Ministry — PRF / Micro Finance Programme — Historical PRF data (₹80 crore released, 20.21 lakh beneficiaries as of March 2010)
- NCGTC — Trustee for CGFMU and other credit guarantee funds
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