CGTMSE Scheme in 2026: Collateral-Free Loans up to ₹10 Crore — Coverage, Fees and How to Apply

Most small businesses in India are turned down for loans not because the idea is bad but because they have no property to pledge. The CGTMSE scheme exists to fix that: the government-backed trust guarantees the lender's loss, so the bank can lend without collateral. This guide is for micro and small enterprise owners planning a term loan or working-capital limit. It covers the ₹10 crore ceiling that applies from April 2025, how much of the loan is guaranteed, the fee and who pays it, eligibility, how to apply, and the 2025–26 changes — with ₹ examples.

Quick answer

CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) guarantees collateral-free loans that banks and other member lenders give to micro and small enterprises. Since 1 April 2025, banks can cover up to ₹10 crore per borrower. You apply to the bank, not to CGTMSE.

• Coverage: 75% to 90% of the amount in default, depending on loan size and borrower category

• Annual guarantee fee: 0.37% (up to ₹10 lakh) to 1.20% (₹8–10 crore), 10% lower for women, SC/ST and other priority groups

• New or existing manufacturing, services and trading MSEs; term loans and working capital

• No collateral or third-party guarantee — except the secured part of a 'hybrid' loan

What CGTMSE is and how the guarantee works

The Credit Guarantee Fund Trust for Micro and Small Enterprises was set up in 2000 by the Ministry of MSME and SIDBI. It runs the Credit Guarantee Fund Scheme for Micro and Small Enterprises. It does not lend; it insures the lender.

The mechanism is simple:

1. A member lending institution (MLI) — a bank, small finance bank, RRB, co-operative bank, NBFC or other registered lender — sanctions a loan to a micro or small enterprise without collateral security or third-party guarantee.
2. The lender applies to CGTMSE for cover and pays an annual guarantee fee (AGF).
3. If the loan becomes a non-performing asset and the lender has started recovery, it claims the guaranteed share of the amount in default from CGTMSE.

Because most of the loss is covered, the bank can judge your loan on the viability of the business rather than on property. That is why it matters for first-generation entrepreneurs, tenants running units in rented sheds, and service businesses with few hard assets.

CGTMSE at a glance (2026)

₹10 crore

Maximum cover per borrower

banks & select FIs, from 1 Apr 2025

75%–90%

Share of default guaranteed

0.37%

Lowest annual fee

loans up to ₹10 lakh

18 months

Lock-in before a claim

9 months for small, short loans

Who is eligible

Borrowers. New or existing micro and small enterprises — by the current MSME definition, units with investment up to ₹25 crore and turnover up to ₹100 crore. That includes:

• Manufacturing and service enterprises.
• Retail and wholesale traders, eligible with all lenders on the same coverage, ceiling and fee terms as other activities.
• Educational and training institutions.

Medium enterprises are not covered. Lenders ask for proof of MSE status, so keep your Udyam registration current.

Loans. Fund-based and non-fund-based facilities — term loans, working-capital limits (cash credit, overdraft), letters of credit and bank guarantees — taken together or separately. There is no interest-rate ceiling: any rate charged under RBI guidelines is acceptable.

What is not covered.

• Loans secured by collateral or a third-party guarantee (except under the hybrid option below).
• Loans already covered by another guarantee scheme, including NCGTC schemes, to the extent covered.
• Accounts that are already NPAs. For existing loans brought under cover later, the account must not have been restructured or in SMA-2 status in the past year.
• Borrowers whose earlier CGTMSE-covered default led to a claim that has not been repaid.

Hybrid security. If you can offer some collateral, the lender may take it for part of the loan and cover the unsecured balance under CGTMSE.

Loan limits by type of lender

The ceiling depends on who lends to you:

• Public and private sector banks, foreign banks and select financial institutions: ₹10 crore per borrower, from 1 April 2025.
• Small finance banks, RRBs, state financial corporations, urban and other co-operative banks: ₹2 crore, as per the scheme document updated January 2025.
• Microfinance institutions: ₹50 lakh.

The cap applies to your total outstanding CGTMSE-covered credit across lenders. As you repay, the headroom frees up for fresh covered credit. Even on a loan above the ceiling, cover stops at the ceiling — for a ₹10 crore exposure, CGTMSE's maximum liability is ₹7.5 crore. NBFCs participate under separate CGTMSE schemes with their own limits; ask the lender which applies.

How much of the loan is guaranteed

CGTMSE pays the lender a percentage of the amount in default, not of the sanctioned loan. The rates below apply to guarantees issued on or after 10 December 2024.

Extent of guarantee coverage

Borrower category	Maximum coverage
Micro enterprises — loans up to ₹5 lakh	85%
Micro enterprises — ₹5 lakh to ₹50 lakh	75%
MSEs in the North East, J&K and Ladakh — up to ₹50 lakh	80%
Women entrepreneurs; MSEs promoted by Agniveers	90%
SC/ST entrepreneurs, persons with disabilities, MSEs in Aspirational Districts, ZED-certified MSEs	85%
All other borrowers	75%
Any MSE in an RBI-identified credit-deficient district	+5 percentage points on the above

Micro enterprises — loans up to ₹5 lakh

Maximum coverage

85%

Micro enterprises — ₹5 lakh to ₹50 lakh

Maximum coverage

75%

MSEs in the North East, J&K and Ladakh — up to ₹50 lakh

Maximum coverage

80%

Women entrepreneurs; MSEs promoted by Agniveers

Maximum coverage

90%

SC/ST entrepreneurs, persons with disabilities, MSEs in Aspirational Districts, ZED-certified MSEs

Maximum coverage

85%

All other borrowers

Maximum coverage

75%

Any MSE in an RBI-identified credit-deficient district

Maximum coverage

+5 percentage points on the above

The 90% rate for women entrepreneurs was introduced by CGTMSE Circular 241 in December 2024. Higher coverage makes banks more willing to lend; it does not reduce what you owe.

For loans above ₹50 lakh, the lender must rate the proposal internally and it must be of investment grade. Lenders also look at your personal and business credit record, so check your CIBIL score and CIBIL MSME Rank before applying.

Guarantee fee: rates and who pays

The annual guarantee fee (AGF) was revised for all guarantees approved or renewed on or after 1 April 2025:

Concessions. The rate is 10% lower for women, SC/ST entrepreneurs, persons with disabilities, Agniveers and transgender entrepreneurs; for MSEs in the North East (including Sikkim), J&K and Ladakh (up to ₹50 lakh), aspirational and credit-deficient districts; and for ZED-certified MSEs. Lenders with good claim records get a discount, and high-claim lenders pay a risk premium.

How it is charged. In the first year the fee is on the guaranteed amount; after that, on the outstanding amount. The fee is the lender's liability, but CGTMSE leaves it to the lender whether to recover it from you — most do.

Worked examples.

• ₹50 lakh term loan to a micro manufacturer. Year 1 fee: 0.55% × ₹50,00,000 = ₹27,500. If ₹40 lakh is outstanding at the start of year 2, the fee falls to ₹22,000.
• Same loan to a woman entrepreneur. 10% concession → 0.495%: ₹24,750 in year 1, and 90% coverage instead of 75%.
• ₹3 crore working-capital limit. 1.00% × ₹3,00,00,000 = ₹3,00,000 a year — weigh this against the cost of pledging property and paying for valuation, legal checks and mortgage registration.

Check the EMI on a CGTMSE-covered term loan

Loan AmountInterest Rate (p.a.)Tenure

Loan Amount₹50,00,000.00

Total Interest₹14,48,170.11

Total Payable₹64,48,170.11

Number of EMIs60

Monthly EMI₹1,07,469.50

Open the full EMI Calculator (PDF, save, compare)

Add the yearly guarantee fee to the EMI when comparing offers — on a ₹50 lakh loan it adds roughly ₹2,300 a month in year 1.

How to apply for a CGTMSE loan

From proposal to guarantee

1. 1

   Get your papers in order

   Udyam registration, PAN, GST registration (if applicable), bank statements for 6–12 months, ITRs and financial statements for existing units, and a project report with cost, means of finance and projected cash flows for new units or expansions.

2. 2

   Approach a member lender

   Apply at a bank or other MLI for a term loan or working-capital limit and ask for it to be considered without collateral under CGTMSE.

   Tip: You can also start online on PSB Loans in 59 Minutes or JanSamarth; the guarantee is still arranged by the lender.

3. 3

   Lender appraises viability

   The bank checks the project, your credit record and repayment capacity. Loans above ₹50 lakh must be internally rated investment grade.

4. 4

   Sanction and guarantee application

   After sanction, the lender applies for cover on the CGTMSE portal, pays the first year's fee and receives the guarantee. Check the sanction letter for the fee and whether it is charged to you.

5. 5

   Keep the guarantee alive

   The lender renews the fee each year on the outstanding amount. Working-capital guarantees run in blocks of 5 years and can be renewed.

Common reasons for rejection: a poor credit record, an unviable or vague project report, mixing personal and business transactions, or the bank insisting on collateral anyway. RBI rules already bar banks from taking collateral on MSE loans up to ₹20 lakh; for larger loans, ask specifically for CGTMSE cover and escalate to the branch's controlling office if refused without reasons.

What happens if the loan goes bad

The guarantee protects the lender, not the borrower. If you stop paying:

• The account becomes an NPA, is reported to credit bureaus and your score drops.
• The lender recalls the loan and starts recovery proceedings — a guarantee claim is allowed only after this.
• It can claim only after the lock-in period of 18 months from the last disbursement or the guarantee start, whichever is later (9 months for guarantees up to ₹10 lakh with tenure up to 36 months), and within three years of the NPA date.
• CGTMSE settles the claim, usually 75% first and the balance after recovery proceedings conclude. Any later recovery from you is shared with the Trust.

You remain liable for the full debt, and an unpaid claim makes you ineligible for future CGTMSE-covered credit.

What changed in 2025 and 2026

Recent CGTMSE changes

10 Dec 2024

Coverage for women entrepreneurs raised to 90%; Agniveer-promoted MSEs added

1 Feb 2025

Budget 2025-26 announces guarantee cover for MSEs rising from ₹5 crore to ₹10 crore

1 Apr 2025

₹10 crore ceiling for banks and select FIs (Circular 250) and revised fee slabs from 0.37% to 1.20%

22 Sep 2026

CGTMSE guarantee goes live on TReDS for financing micro and small enterprises' invoices

The TReDS guarantee is the newest piece. Financiers on Trade Receivables Discounting System platforms can now seek CGTMSE cover on invoices that MSEs discount against approved buyers, applying in real time through the platform. For a supplier waiting 60–90 days for a large buyer to pay, that should mean more financiers bidding and better discount rates — ask your TReDS platform whether your buyer's invoices qualify.

Official links

• CGTMSE — homeScheme documents, circulars, member lenders
• Guarantee fee structureAGF slabs and concessions from 1 April 2025
• Credit facilities and parametersEligible facilities, ₹10 crore ceiling, hybrid security
• Circular 250/2024-25 (₹5 crore to ₹10 crore)Effective for guarantees approved from 1 April 2025
• Udyam Registration portalFree MSME registration needed as proof of status
• JanSamarthApply online for government-linked business loans

What to do next

Get your Udyam certificate and credit report in order, then work out what you can afford with our loan eligibility calculator and EMI calculator, and size your cash-cycle needs with the working capital calculator. If your requirement is under ₹20 lakh, compare with a Mudra loan; for a new unit that qualifies for a capital subsidy, see PMEGP.

This is general information, not financial advice — confirm the current terms with your lender and on the official CGTMSE site.

Frequently asked questions

What is the full form of CGTMSE?

CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises. It was set up in 2000 by the Ministry of MSME and SIDBI. It does not lend money itself — it guarantees loans that banks and other member lending institutions give to micro and small enterprises without collateral, so the lender recovers most of its loss if the loan goes bad.

What is the maximum loan under CGTMSE in 2026?

Banks and select financial institutions can now get CGTMSE cover on collateral-free credit of up to ₹10 crore per borrower, raised from ₹5 crore for guarantees approved on or after 1 April 2025 after the Budget 2025-26 announcement. Small finance banks, RRBs, co-operative banks and microfinance institutions have lower ceilings under the scheme document.

Can I apply for a CGTMSE loan directly?

No. You apply for a business loan to a bank or other member lending institution and ask for it to be covered under CGTMSE. If the lender finds your project viable and sanctions it without collateral, the lender applies to CGTMSE for the guarantee online. Beware of agents who claim to get 'CGTMSE approval' for a fee.

Who pays the CGTMSE guarantee fee?

The fee is charged to the lender, starting at 0.37% a year for guarantees up to ₹10 lakh and rising to 1.20% for ₹8–10 crore. CGTMSE leaves it to the lender to decide whether to pass it on, and most banks do recover it from the borrower — ask for it in writing in the sanction letter.

Is CGTMSE available for traders and new businesses?

Yes. New and existing micro and small enterprises in manufacturing and services are eligible, and retail and wholesale trade has been an eligible activity for all lenders, with the same coverage, ceiling and fees. Educational and training institutions are also covered. Medium enterprises are not covered.

What happens if I default on a CGTMSE-covered loan?

The guarantee protects the lender, not you. You still owe the full amount; the lender will classify the loan as an NPA, recall it, start recovery and report the default to credit bureaus. Only after that can it claim the guaranteed share from CGTMSE, and any later recovery is shared with the Trust.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 7 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Circular No. 250/2024-25 — Increase in ceiling of guarantee coverage from ₹5 crore to ₹10 crore (CGS-I) — CGTMSE · accessed 7 October 2026
2. 2.Guarantee fee structure — CGTMSE · accessed 7 October 2026
3. 3.Credit facilities and parameters — CGTMSE · accessed 7 October 2026
4. 4.Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS-I) — scheme document updated 1 January 2025 — CGTMSE · accessed 7 October 2026
5. 5.Summary of Union Budget 2025-26 — Press Information Bureau, Ministry of Finance · accessed 7 October 2026
6. 6.MSME credit guarantee cover goes live for invoice financing on TReDS — The Tribune · accessed 7 October 2026
7. 7.CGTMSE guarantee cover for TReDS financing becomes operational for MSMEs — BW Businessworld · accessed 7 October 2026