The government of India had recognized the emerging popularity of micro and small businesses, which played a considerable part in employing the country's population. It was estimated that over 26 million such MSEs were operational in the country and provided employment to around 60 million people.

  • MSEs have a significant contribution to India's manufacturing and export of goods to other countries.
  • By the estimation of the government officials, about 40% of the nation's export goods were manufactured by these MSEs.

That is why the government decided to implement plans to help these businesses secure capital for themselves by launching the Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE) scheme in the year 2000.

The CGTMSE scheme was a special endeavor by the government of India to help micro, small, and medium enterprises obtain loans without third-party collateral. This scheme aims to provide credit guarantees so that lending institutions can sanction loans for these budding businesses.

What is CGTMSE

The CGTMSE was launched in August 2000. It was an initiative of the government of India under the Ministry of Micro, Small and Medium Enterprises, and Small Industries Development Bank Of India (SIDBI). The CGTMSE full form is Credit Guarantee Trust Fund for Micro and Small Enterprises.

Salient features include -

  • Through this scheme, enterprises will be able to get loans from various lending institutions without any external collateral or security
  • The government will act as the security, and the scheme will cover a large portion of the loan sanctioned by the lending institution
  • This credit scheme not only provides coverage to existing businesses but also new businesses and budding businesses
  • Small and medium enterprises in various sectors will be eligible to receive credit guarantees from the government
  • The interest rates are also kept to a minimum to help these businesses establish themselves
  • The credit assurance availed can be up to Rs.2 crore
  • The CGTMSE scheme will cover up to 75% of the loan amount credited to the borrower by the lending institution
  • For women, North East States, and micro businesses with up to Rs.5 lakh credit amount, the coverage claims can be extended to 80%.

A one-time guarantee CGTMSE fee of 1.5% for loans above Rs.5 lakhs and 1% for loans up to 5 lakhs will be levied by the government. Additionally, annual service fees of 0.75% and 0.5% will be charged on loans above and up to Rs.5 lakhs, respectively. For North East States, the one-time fee is levied at 0.75% for all.

Success of The CGTMSE Scheme

The government and The Ministry of Micro, Small and Medium Enterprises, and Small Industries Development Bank Of India(SIDBI) jointly contribute to this scheme in a 4:1 ratio. Till 2010, they contributed Rs.1906.55 crore towards the Credit Guarantee Fund Trust, which helped implement the CGTMSE scheme.

Since the launch of the scheme, the government has reached out to many small and medium businesses. According to the data provided by the government, it has approved over 3,00,000 proposals and has successfully covered around Rs.11550.61crore worth of credit. The scheme was able to help people across 35 states and union territories.

In the year 2000-2001, the first year from which the scheme was operational, around 951 proposals were approved, and credit coverage of Rs.606 lakhs was made. The scheme is still operating, and the government has been able to increase the approval numbers by 52%, taking it to 43 lakhs in the financial year 2020-2021. The total amount covered by the scheme stood at Rs.2.21 lakh crore.

Who is Eligible For The CGTMSE Scheme?

The CGTMSE scheme covers small and medium enterprises in most of the industrial sectors. Here are the CGTMSE scheme eligibility criteria for those who want to apply are -

  • Indian citizens who are 18 and above above the age of 18
  • New as well as existing enterprises
  • Enterprises within the manufacturing sector
  • Enterprises in service activities as per MSMED Act, 2006
  • Small road and water transport loans
  • Credit facilities need to be taken from a single enlisted lending institution, as mentioned by the CGTMSE scheme
  • Enterprises that State Level Institution/NSINEDFi already supports

Which Banks and Lending Institutions provide CGTMSE Loans?

You also need to know that not all kinds of lending authorities are allowed to file for CGTMSE scheme coverage. You cannot apply with CGTMSE for loans taken from private individuals or unrecognized lending institutions that CGTMSE does not mention. Mentioned below is a list of lending institutions that are recognized by the CGTMSE scheme:-

  • Scheduled Commercial Banks (SCBs)
  • Regional Rural Banks (RRBs)
  • Small Finance Banks (SFBs)
  • Non-banking Financial Companies (NBFCs)
  • Small Industrial Development Bank of India (SIDBI)
  • National Small Industries Corporation (NSIC)
  • North Eastern Development Finance Corporation Ltd. (NEDFi)

What Are The Documents Needed For CGTMSE Loan?

Here is a list of documents that you need to keep ready if you want to apply for a loan under the CGTMSE scheme:-

  • CGTMSE loan application form with Passport-sized photographs
  • Self-drafted or professionally drafted Business Plan
  • Business incorporation letter / Company registration certificate
  • Business Project Report
  • CGTMSE Loan Coverage Letter
  • Copy of loan approval from the bank
  • Other documents required by the lending institution

How to Apply For CGTMSE Loan?

Small and Medium enterprises seeking to avail of the scheme's benefits will have to apply for a CGTMSE loan separately. Here are the steps borrowers need to follow to apply for a loan with CGTMSE collateral coverage:-

  • Step 1
    Borrower/borrowers need to register their private limited company, limited liability partnership, one-person company, or a company proprietorship and procure the necessary approvals and tax registrations. Borrower(s) will not be able to apply for a loan without being registered at the government database.
  • Step 2
    The Borrower/borrowers need to make a detailed business plan that consists of the business model, promoter profile, projected financials, and so on. This report needs to be submitted to the lending institution from which the loan needs to be procured. This business plan will decide the eligibility of the loan amount.
  • Step 3
    When you file the business plan and submit it to the lending authority, you also need to submit a CGTMSE application with all the necessary details. You will be able to download this application from the official website
  • Step 4
    The lending authority will now start the process of analysis and verification before sanctioning the loan. The lending authority will do so by following its policies. The time needed for sanctioning a loan varies.
  • Step 5
    The lending institution will then apply to CGTMSE on your behalf to obtain the collateral guarantee. After CGTMSE approves the request, you will have to make the one-time CGTMSE fee and the service charges according to the loan amount sanctioned.

Important Note: CGTMSE will only cover the collateral for a part of your loan. For the rest of the credit amount, you will have to produce some security coverage.

Limitations of the CGTMSE Scheme

Now that you know the eligibility criteria of CGTMSE loans, you also need to remember that there are certain limitations on who can claim the scheme and how it will work. Here are a few exceptions you need to keep in mind while applying for a CGTMSE loan:-

  • CGTMSE backed loans are not given to enterprises like Educational institutions, agriculture, training institutions, and Self-Help Groups (SHGs).
  • If your enterprise is already under a government or private scheme that covers credit risks, you will not be able to apply for this scheme.
  • You will not be able to claim coverage for more than Rs.2 crore.
  • You will be able to claim coverage for up to 75% of the credit amount only. Women will be allowed to claim coverage of up to 80% credit amount only.
  • The one-time CGTMSE guarantee fee and the annual service fees will not qualify for guarantee cover.
  • Loans taken from unknown sources and private persons will not qualify for CGTMSE coverage.
  • The loan cover guarantee can be availed only for 5 years or a block of 5 years for working capital.

Special Benefits of CGTMSE Loans

While most CGTMSE scheme eligibility criteria apply to everyone, there are some exceptional cases in which CGTMSE may extend some unique benefits such as -

  • All loans from the North East States are eligible for a credit coverage of up to 80%. An annual fee of only 0.75% is also required to be paid.
  • Women-owned enterprises will be eligible for credit coverage of up to 80%.
  • Micro enterprises with loan credit amounts of up to Rs.5 lakh will be eligible for 80% credit coverage.
  • A special rehabilitation scheme might be extended to businesses who are already under the CGTMSE scheme but have experienced problems that are not direct faults of the management.


CGTMSE is an excellent scheme that the government has introduced to uplift MSEs in the manufacturing and service sectors. You need to check all the CGTMSE scheme eligibility criteria before applying for the loan to increase your chances of approval.

You also need to know how to apply for CGTMSE loans to make the process easier for you. Remember that any separate institution or agent does not operate the CGTMSE scheme. You need to go to their website to download the application and should submit it only to the lending institution from where you wish to take the loan.

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