Credit Guarantee Fund Trust For Micro And Small Enterprises CGTMSE

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Credit Guarantee Fund Trust For Micro And Small Enterprises CGTMSE
Credit Guarantee Fund Trust For Micro And Small Enterprises CGTMSE

What is CGTMSE Scheme?

​​​CGTMSE is a Government of India scheme launched in the year 2000 in collaboration with the Small Industries Development Bank of India (SIDBI). It offers loans to Micro and Small Enterprises (MSEs) without any collateral or third-party guarantee. It also provides guarantees to eligible MSEs on loans availed from Member Lending Institutions (MLIs), i.e., public, private and foreign banks and financial institutions.

Under the CGTMSE scheme, MSEs have been availing credit guarantees up to a ceiling limit of ₹2 crore. This has been revised to ₹5 crore from April 2023.

CGTMSE Scheme Highlights

Credit Guarantee Coverage

  • Get a guarantee cover of up to 75% of the loan amount.

Wide Sector Eligibility

  • The scheme supports a broad range of sectors, including manufacturing, service, and retail trade.

Ease of Application

  • Benefit from a simple and straightforward loan application process supported by clear CGTMSE guidelines.

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Wondering If You Are Eligible?

The following are the eligibility criteria for the CGTMSE Scheme:

  • Both new and existing Micro and Small Enterprises (MSEs) engaged in manufacturing, trading, or service activities (excluding agriculture and self-help groups) are eligible.
  • The borrowing business must demonstrate profitability, viability, and maintain a good financial track record, as assessed by the lending institution.
  • Applicants must not have defaulted with any bank or financial institution.
  • Note: Eligibility is determined as per the MSMED Act, 2006, based on investments in equipment, plant, and machinery, as well as the turnover of the entity.
Credit Guarantee Fund Trust For Micro And Small Enterprises CGTMSE

Key Benefits & Features of the CGTMSE Scheme

No Collateral Requirement

  • Providing collateral is often a significant hurdle for small businesses, many of which have limited or no tangible assets to pledge. The CGTMSE scheme alleviates this issue by offering collateral-free loans, which means that MSEs can secure financing without needing to risk their existing assets. This approach encourages entrepreneurship by allowing startups and smaller enterprises to access the capital they need to grow without the added pressure of collateral requirements. By reducing financial barriers, the scheme fosters a supportive environment for business development and innovation.

No need for collateral

Nominal Guarantee Fee

  • The CGTMSE scheme incorporates an Annual Guarantee Fee (AGF) that borrowers must pay for the guarantees provided. For small-ticket loans up to ₹10 lakh, this fee is intentionally kept low to enhance affordability, ensuring that smaller businesses are not burdened by excessive costs. Even for larger loans between ₹2-5 crore, the maximum AGF is capped at 1.35% of the loan amount, which is relatively competitive in the lending market. However, it’s important for borrowers to remain aware that these rates may fluctuate over time. This nominal fee structure encourages MSEs to pursue necessary financing while managing costs effectively.

No need for collateral

Increased Fund Availability

  • One of the standout features of the CGTMSE scheme is its provision for substantial loan amounts, allowing eligible MSEs to borrow up to ₹5 crore. This increased fund availability enables businesses to address various financial needs, such as managing daily operational expenses, investing in new equipment or technology, and funding expansion projects. With access to these resources, enterprises can improve their operational efficiency, enhance product offerings, and ultimately achieve growth and competitiveness in their respective markets. By supporting these investments, the scheme plays a crucial role in the overall development of the MSME sector.

Nominal guarantee fee

Ease of Application

  • The application process for loans under the CGTMSE scheme is designed to be user-friendly and efficient. The scheme provides clear guidelines and instructions, which significantly simplifies the application process for Micro and Small Enterprises. Member Lending Institutions (MLIs), such as HDFC Bank, can quickly assess applications and disburse funds in a timely manner, reducing wait times for borrowers. This streamlined approach allows MSEs to focus on their core business activities rather than navigating complex lending procedures. The simplicity and efficiency of the application process encourage more businesses to seek financing, ultimately contributing to a more vibrant entrepreneurial ecosystem.
Flexible credit facilities

Most Important Terms & Conditions

  • *The Most Important Terms and Conditions for each of our banking offerings features all the specific terms and conditions that govern their use. You must go through it thoroughly to fully understand the terms and conditions applicable to any banking product you choose.  

MI support 

More About CGTMSE Scheme

Eligible borrowers/businesses can apply for a loan under the CGTMSE scheme by providing the following documents:  

The CGTMSE loan application form 

Proof of business incorporation or company registration certificate 

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Passport-sized photo of the applicant 

KYC of the borrower 

Udyam Registration Certificate 

Collateral-Free Loans:

  • Small businesses often lack sufficient assets to offer as collateral. Loans under the CGTMSE scheme do not require collateral, making it accessible for businesses with limited or no assets. 
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Low Fee:

  • Loans under the CGTMSE scheme charge incur an AGF (Annual Guarantee Fee). For small loans up to ₹10 lakh, the fee is minimal. The highest AGF, applicable to loans between ₹2-5 crore, is 1.35% of the loan amount, which may vary over time.   
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Funding Access:

  • Eligible MSEs eligible for funding can borrow up to ₹5 crore through CGTMSE loan, helping them to meet working capital needs, invest in technology and infrastructure, and support facilitate business expansion.
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Significant Contribution to the Economy

  • Small enterprises account for 96% of industrial units in India and contribute 40% to industrial production and 42% to exports. This underscores their vital role in the economy. The CGTMSE scheme enhances this contribution by providing MSEs with the financial support they need to expand their operations and increase productivity.
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Bridging the Financing Gap

  • The CGTMSE scheme was established to enhance access to formal financing for MSEs, addressing the need for increased borrowing from formal sources among the 6.3 crore MSMEs in India.
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Elimination of Collateral Barriers

  • By offering loans without the requirement for collateral or third-party guarantees, the CGTMSE scheme empowers small businesses to secure funding without the usual financial constraints.
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Protection Against High-Cost Borrowing

  • The CGTMSE scheme helps small businesses avoid the pitfalls of informal financing, such as exorbitant interest rates and unfair trade practices, enabling more sustainable growth.
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Comprehensive Financial Solutions

  • The scheme provides both working capital solutions and term loans, effectively addressing the immediate and long-term financial needs of small businesses, thereby supporting their overall growth and stability.
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Please contact the nearest HDFC Bank branch to initiate the application process.

Frequently Asked Questions

The CGTMSE Scheme is available to the following: 

  • New and existing MSEs.

  • Manufacturers, traders, or service providers.

  • Member Lending Institution (MLI) must view the business as viable and profitable.

  • Borrowers with no default history with any financial institution.

  • Eligibility is based on the investment in equipment, plant, and machinery, as well as the turnover, as defined in the MSMED Act, 2006.

The guarantee cover will commence from the date on which guarantee fee proceeds are credited to bank account of the Trust. Guarantee will commence from guarantee start date and shall run through the agreed tenure of the term loan / composite loans. Where working capital facilities alone are extended to eligible borrowers, it would be for a period of 5 years or block of 5 years on renewal of the guarantee cover, provided MLI pays the Annual Service Fee due as on March 31, latest by within 60 days from the date of demand by CGTMSE or such date as specified by the Trust. 

The following credit facilities are not eligible for cover under the CGTMSE scheme: 

  • Any credit facility, the risk of which is covered by Deposit Insurance and Credit Guarantee Corporation or the RBI 

  • A credit facility, or part thereof, which is covered by the government or any insurance, guarantee or indemnity business

  • Any credit guaranteed by the NCGTC Limited

  • A credit not conforming to, or is inconsistent with, any law or guidelines and directives issued by the Central Government or the RBI

  • Credit availed under the above points involves full or partial default 

  • Any credit disbursed by the MLIs against collaterals or third-party guarantees 

It is an arrangement where the MLI sanctions a portion of the credit facility against a collateral security or third-party guarantee while keeping the remaining portion unsecure. The MLI can cover the unsecured portion under the CGTMSE scheme up to ₹5 crore. 

Yes, the guarantee cover available will be restricted to credit of ₹5 crore even though credit extended is more than ₹5 crore to an eligible borrower. In other words, the maximum credit risk borne by CGTMSE is restricted to ₹3.75 crore i.e. 75% of the amount in default.