Launched in 2000, the CGTMSE scheme is a loan subsidy scheme than offers credit guarantee to over 100+ Member Lending Institutions (MLIs) to offer funds and collateral-free business loans to micro and small enterprises. In April 2023, the credit facility ceiling was increased to enable more businesses to avail the benefits of the Credit Guarantee loan scheme. Read on to learn more about the CGTMSE loan scheme, its eligibility criteria, loan options and more.
If you are a MSME business owner, the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is one scheme you should know of and leverage. The CGTMSE scheme was launched in 2000 and provides eligible Member Lending Institutions (MLIs) the credit guarantee to offer business loans to micro and small enterprises. The initial credit facility ceiling was up to ₹2 crore but has recently been raised to ₹5 crore (April 2023). The revamping of the Credit Guarantee Scheme for MSEs was announced in the Union Budget 2023-24 for effect from April 2023.
You can learn more about loan under CGTMSE scheme on their official website: www.cgtmse.in
CGTMSE scheme full form is Credit Guarantee Fund Trust for Micro and Small Enterprises. It is an initiative undertaken collectively by the Government of India (GoI), the Ministry of Micro, Small and Medium Enterprises (MoMSME) and the Small Industries Development Bank of India (SIDBI).
The objective of the Credit Guarantee Scheme (CGS) is to enable micro and small businesses (MSEs) and new entrepreneurs to avail collateral-free loans to set up their enterprises and grow. It also aims to make it easier for the under-served and unserved to gain access to funds and facilitates credit flow to the MSE sector.
When borrowers apply for loans, lending institutions usually ask for collaterals as security or a third-party guarantor to back the borrower. This reduces the risks in case the borrower defaults.
This is often difficult for small business owners who often lack asset support (e.g., land, property etc.) for collateral loans.
The Credit Guarantee Scheme was launched to ease this challenge. Under this scheme, when a MLI lends funds to a borrower, it is backed by the scheme and provides coverage for up to 75-85% of the loan amount. This reduces the risks and also gives MSEs the scope to borrow funds for starting and growing their business.
The CGTMSE scheme limit was initially set at ₹2 crore but has been increased to ₹5 crore (applicable from April 2023) to meet the diverse and wider entrepreneurial needs.
Update from Budget 2024 Highlights (23 July 2024)
The government recently announced a significant program to bolster the manufacturing sector. This credit guarantee scheme will make it easier for micro, small, and medium enterprises (MSMEs) to secure loans for purchasing new machinery and equipment. Unlike traditional loans, collateral or personal guarantees won’t be required. The scheme functions by pooling the credit risks of participating MSMEs, creating a self-funded guarantee fund. This fund can provide coverage up to ₹100 crore per applicant, with the potential for even larger loans. However, borrowers will need to pay an initial guarantee fee and an annual fee based on the outstanding loan balance.
Note: The scheme is applicable for micro and small businesses (MSEs) as per the new MSME classification based on annual turnover and investment in plant and machinery.
The maximum loan limit under the CGTMSE scheme is ₹5 crores (as of April 2023). This credit can be provided by a single MLI individually or jointly with other lenders, as per the ceiling amount.
In FY 2023, guarantee approvals of ₹1,04,781 crore was provided by the Credit Guarantee Scheme (Source: CGTMSE website, cgtmse.in). This is not surprising as the scheme was designed specifically to enable MSEs to borrow funds hassle-free.
On that note, let us take a look at the CGTMSE scheme details and prominent features:
For the latest updates on CGTMSE scheme subsidy and other benefits visit the CGTMSE website.
In this section, we take a look at the extent of coverage guarantee that is provided to MSEs under the CGTMSE scheme.
The maximum extent or coverage criteria is based on:
Let’s take a look at the trust’s coverage criteria for CGTMSE loan scheme:
*For the complete list of CGTMSE scheme banks, visit the website: www.cgtmse.in
There is an additional 45 NBFCs included under the Credit Guarantee Scheme for NBFCs. Some of the popular names include:
The CGTMSE scheme has been one of the most accepted and successful loan schemes introduced by the government for micro and small enterprises. The success encouraged the government to infuse an additional ₹9,000 crore in the CGTMSE corpus, effective from April 2023 (Source: Financial Express, April 2023).
As per the new CGTMSE scheme revisions, a loan of up to ₹5 crore can be raised by more than one financial institution/bank either independently or jointly based on the lender’s ceiling amount. The scheme also has included microfinance institutions (MFIs) to its list of members. Microfinance institutions, like banks provide loans or micro finance loans of a smaller value.
In FY2023, a total of 11,65, 786 number of guarantees were approved under the CGTMSE scheme.
Yes. As per circular, from January 2023 Udyam registration is required. Since the scheme is applicable to micro and small businesses only, a borrower must register their business in the Udyam portal, obtain the MSME registration certificate and provide the Udyam registration number to avail funds under the scheme.
Yes, as per the latest changes, credit facilities can be availed through more than one lender either jointly or separately. The amount of credit offered will depend on the individual lender’s ceiling.
Sohini is a seasoned content writer with 12 years’ experience in developing marketing and business content across multiple formats. At Tata nexarc, she leverages her skills in crafting curated content on the Indian MSME sector, steel procurement, and logistics. In her personal time, she enjoys reading fiction and being up-to-date on trends in digital marketing and the Indian business ecosystem.
