{"id":14188,"date":"2026-05-27T07:39:02","date_gmt":"2026-05-27T07:39:02","guid":{"rendered":"https:\/\/lemonn.co.in\/blog\/glossary\/cgtmse-scheme\/"},"modified":"2026-05-27T07:39:02","modified_gmt":"2026-05-27T07:39:02","slug":"cgtmse-scheme","status":"publish","type":"glossary","link":"https:\/\/lemonn.co.in\/blog\/glossary\/cgtmse-scheme\/","title":{"rendered":"CGTMSE Scheme"},"content":{"rendered":"

CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises. It is a scheme set up jointly by the Ministry of Micro, Small and Medium Enterprises (MSME) and the Small Industries Development Bank of India (SIDBI) to provide collateral-free credit to micro and small enterprises by guaranteeing loans sanctioned by member lending institutions.<\/p>\n

What Is the CGTMSE Scheme<\/a>?<\/h2>\n

CGTMSE enables banks and financial institutions to lend to micro and small enterprises without requiring collateral or third-party guarantees. Instead of the borrower providing physical security, the CGTMSE Trust guarantees a portion of the loan, reducing the bank’s risk.<\/p>\n

This is transformative for small businesses that have viable business plans but lack fixed assets<\/a> to pledge as collateral.<\/p>\n

How CGTMSE Works<\/h2>\n

1. A micro or small enterprise applies for a loan from a member bank or NBFC
\n2. The lender assesses creditworthiness and decides to extend credit under CGTMSE
\n3. The lender pays a guarantee fee to CGTMSE
\n4. CGTMSE issues a guarantee covering 75% to 85% of the loan (higher for smaller loans and women-owned businesses)
\n5. If the borrower defaults, CGTMSE pays the guaranteed portion to the lender<\/p>\n

Coverage and Limits<\/h2>\n

– Loan limit covered: up to Rs 500 lakh (Rs 5 crore) under the current scheme
\n– Guarantee coverage: 75% to 85% depending on the borrower category
\n– Women entrepreneurs and NE region enterprises: 85% coverage
\n– Micro enterprises up to Rs 5 lakh: 85% coverage<\/p>\n

Guarantee Fee<\/h2>\n

A one-time guarantee fee and annual service fee are charged to the lending institution, which may pass it on to the borrower. The fee is a fraction of the loan amount and is significantly less costly than providing physical collateral.<\/p>\n

Benefits for Small Businesses<\/h2>\n

– Access to credit without mortgaging property or assets
\n– Encourages first-generation entrepreneurs who lack collateral
\n– Enables banks to lend confidently to small businesses
\n– Supports MSMEs in sector<\/a>s like manufacturing, services, and retail<\/p>\n

Practical Example<\/h2>\n

Rajan wants to start a small food processing unit but has no property to offer as collateral. He applies for a Rs 25 lakh loan under CGTMSE at his bank. The bank pays a guarantee fee to CGTMSE and approves the loan without asking for collateral. If Rajan defaults, CGTMSE covers 75% of the outstanding loan for the bank. Rajan can now focus on building his business rather than worrying about arranging collateral.<\/p>\n

Key Takeaways<\/h2>\n

– CGTMSE provides loan guarantees to enable collateral-free lending to micro and small enterprises
\n– Coverage of 75% to 85% of the loan amount reduces bank risk significantly
\n– Loans up to Rs 5 crore are eligible for CGTMSE coverage
\n– Higher coverage (85%) is available for women entrepreneurs and micro enterprises below Rs 5 lakh
\n– Enables first-generation entrepreneurs and asset-light businesses to access formal credit<\/p>\n","protected":false},"excerpt":{"rendered":"

CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises. It is a scheme set up jointly by the Ministry of Micro, Small and Medium Enterprises (MSME) and the Small Industries Development Bank of India (SIDBI) to provide collateral-free credit to micro and small enterprises by guaranteeing loans sanctioned by member lending institutions. […]<\/p>\n","protected":false},"author":3,"featured_media":0,"menu_order":0,"template":"","meta":{"_uag_custom_page_level_css":"","footnotes":""},"class_list":["post-14188","glossary","type-glossary","status-publish","hentry"],"blocksy_meta":[],"uagb_featured_image_src":{"full":false,"thumbnail":false,"medium":false,"medium_large":false,"large":false,"1536x1536":false,"2048x2048":false,"web-stories-poster-portrait":false,"web-stories-publisher-logo":false,"web-stories-thumbnail":false},"uagb_author_info":{"display_name":"Team Lemonn","author_link":"https:\/\/lemonn.co.in\/blog\/author\/ashu\/"},"uagb_comment_info":0,"uagb_excerpt":"CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises. It is a scheme set up jointly by the Ministry of Micro, Small and Medium Enterprises (MSME) and the Small Industries Development Bank of India (SIDBI) to provide collateral-free credit to micro and small enterprises by guaranteeing loans sanctioned by member lending institutions.…","_links":{"self":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14188","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary"}],"about":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/types\/glossary"}],"author":[{"embeddable":true,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/users\/3"}],"version-history":[{"count":0,"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/glossary\/14188\/revisions"}],"wp:attachment":[{"href":"https:\/\/lemonn.co.in\/blog\/wp-json\/wp\/v2\/media?parent=14188"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}