Credit Guarantee Fund Trust for Micro and Small Enterprises

CGTMSE is an initiative of the government of India launched on 30 August 2000 in collaboration with the Ministry of Micro, Small, and Medium Enterprises (MSME) and the Small Industries Development Bank of India (SIDBI). The CGTMSE full form is Micro and Small Enterprises’ Credit Guarantee Fund and is a trust that offers credit guarantees to financial institutions to lend to SMEs and MSMEs.

CGTMSE’s goal is to enable entrepreneurs for the first time to build SMEs and MSMEs which are considered the bulwark of the Indian economy through the use of guaranteed free loans from qualified financial institutions.The guarantee shall cover the borrower’s default in paying the advance. The CGTMSE scheme, therefore, provides primarily for the supply of loans for first-generation entrepreneurs to thrive without the pressure of protection or third-party collateral in a competitive market. The financial institutions, in turn, are covered for the lack of safety to finance small and medium-sized Indian businesses to a certain extent.

Features of the Credit Guarantee Scheme:

The emphasis on creating a strong lending aid system that promotes a better flow of loans to SMEs and the MSME sector is one of the major aims of the CGTMSE coverage. CGTMSE is distinguished by its features:

  • In certain situations, assured recovery of 75% or 85% for defaulting principal loans is up to Rs.50 lakh.
  • For loans greater than Rs.50 lakh but Rs.1 crore, the maximum guarantee is 50 percent.
  • Offers an 85% repayment to micro-companies for loans up to Rs.5 lakhs.
  • The amount of guarantee to be reimbursed is 80% of the loan in cases where the MSME is being promoted by a woman, or where it is located in the Northeast (NER) Area.
  • The repayment procedure or CGTMSE loan recovery covers the entire loan amount inclusive of the interest component for 3 months and/ or the entire outstanding loan amount along with the accrued interest from the suit filed date or the day when the loan turns into an NPA, whichever is lower.
  • Rehabilitation to assist the lender in resuscitating the company if the loss is beyond management’s control as part of the Rs.1 crore.

CGTMSE Scheme Eligibility Criteria:

In compliance with the CGTMSE Guidelines, loan guarantees are considered to help a borrower with collateral and free advance guarantee. The scheme provides for an overall credit limit of Rs. 2 crores to be extended to the Member lending institution that can be both an NBFC, lending to the SME sector and the MSME sector that, in any case, will cover a large share of the lending sum. Both credit providers and borrowers are subject to the eligibility standards:

  • Lending Institutions: It covers the entire range of regular business banks, SIDBI, NSIC, NEDFi, SFB, and NBFCs, which lend to the particular industry and have entered into an arrangement for that reason with CGTMSE or the Trust. These are designated as Member Lending Institutions (MLIs) and number 131 at present.
  • Lending Borrowers: All new and existing SMEs are subject to the CGTMSE coverage:
  1. The overall credit facilities for a guarantee cover not more than Rs. 62.50 lakhs / Rs. 65 lakhs shall be Rs. 50 lakhs.
  2. The guarantee cap is limited to Rs. 1 crore on loans above Rs.50 lakhs.
  • Term credit on the date on which the loan is called an NPA or a suit is filed for the full amount outstanding.
  • Exclusions: Some entities are excluded from the CGTMSE coverage. They are:
  1. Retail Trade.
  2. Educational Institutions.
  • Agriculture.
  1. Self Help Groups (SHG).
  2. Training Institutes.

CGTMSE Application:

When they are sanctioned, it is the lender’s responsibility to apply for eligible credit facilities. The agreed criteria for looking for a guarantee are:

  • Sanctioned during the calendar quarter latest by the end of the subsequent calendar quarter.
  • The guarantee will commence the date the CGTMSE fee is paid.
  • The cover shall run for the agreed-upon tenure for the Term and Composite Loans.
  • If only Working Capital Loan is provided to the borrower, the period of cover shall be 5 years or any other period specified by CGTMSE.

Documents Required for CGTMSE Loan Process:

The applicant has an uninterrupted experience with the availability of a credit facility or a loan from the lender. The key CGTMSE loan scheme measures can be laid down as follows:

Establishment of the Business Entity: 

In the related category such as ownership, partnership, or limited company, the unit has to be incorporated and the requisite permits, certificates, and tax entries are required to carry out the project.

  • Business Project Report: A detailed market research and review should be carried out to identify the project components well. The mandatory considerations are:
  1. Business Model.
  2. Promoter Profile.
  • Cost and other Financials.
  • Submission: For further processing, the project report and the CGTMSE loan application form shall be forwarded to the lender. In the case of the right homework, the first step is taken to achieve success.
  • CGTMSE Scheme Banks Sanction: After successfully submitting CGTMSE application forms, the processing begins. The feasibility of the project’s sanction is matched with the lender’s policy after proper assessment and evaluation.
  • Obtaining CGTMSE Loan Cover: It shall be the lender’s obligation to file a guarantee cover at CGTMSE after the sanction of the loan.

Interest Rate for CGTMSE Loan: All lenders charge the borrower at a certain cost. The principal component of the borrower’s expense is the loan interest rate. Most lenders are retrieving CGTMSE loan interest rates, with a guarantee cover that is not more than 14% to 18%.


Micro / Small Enterprises Credit Guarantee Funds Trust is a management operation performed by the MSME with SIDBI. Credit Guarantee Funds Trust is an administrative activity. Its emphasis is to create a strong loan reduction system to facilitate a superior credit source for the MSME segment. The event took place in August 2000 intending to influence the fantasies of developing specialized units of their own, as planned, for original business people. CGTMSE provides loan companies that have a certain confine share for all medium, small, and small-scale loans issued by them. This practice permits banks and other loan organizations, without the security conditions or external guarantees, to provide assets to original business visionaries.