CGTMSE Scheme

The CGTMSE Scheme helps micro and small enterprises (MSEs) in India access credit by providing lenders with a guarantee against loan defaults. This reduces risk for lenders, encouraging them to offer loans to MSEs at lower rates. In turn, MSEs benefit from improved financial health, increased competitiveness, and the ability to invest in their growth.

By bridging the gap between MSEs and formal financial institutions, the scheme unlocks significant benefits for both parties. Lenders benefit from mitigated credit risk, a diversified loan portfolio, and enhanced profitability. The borrowers could access better credit, have lower interest rates, and overall manage their businesses better.

The scheme also contributes to the wider Indian economy by stimulating economic growth, promoting financial inclusion, and supporting social development. Overall, the CGTMSE Scheme plays a vital role in building a stronger and more inclusive economy for the future.

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CGTMSE Scheme Highlights

For MSEs, the CGTMSE Scheme helps in gathering opportunities to help their business grow, here are some highlights of the scheme:

For Micro and Small Enterprises:

Increased access to credit: Makes it easier for MSEs to get loans from banks and financial institutions.
Lower interest rates: Lenders offer lower interest rates due to reduced risk from the CGTMSE guarantee.
Improved financial health: Timely credit helps manage cash flow and invest in growth.
Enhanced competitiveness: Access to credit enables technology upgrades and improved market presence.

For Lenders:

Mitigated credit risk: CGTMSE guarantee minimizes potential losses incurred from MSE loan defaults, creating a safer lending environment.
Diversified loan portfolio: Expanded reach to the MSE sector diversified lenders' portfolios, reducing risk concentration and improving financial stability.
Enhanced profitability: Reduced risk and increased lending volume contribute to improved profitability for lenders.

Percentage of Guarantee Under CGTMSE Scheme

The percentage of guarantee under the CGTMSE Scheme depends on the loan amount and the borrower's characteristics, the maximum guarantee provided for different types of businesses is as follows:

1. Micro Enterprises:

Up to Rs. 5,00,000 – 85% of the default amount (maximum Rs. 4,25,000)
Above Rs. 5,00,000 up to Rs. 50,00,000 – 75% of the default amount (maximum Rs. 37,50,000)
Up to Rs. 2,00,00,000 – 75% of the default amount (maximum Rs. 1,50,00,000)

2. Women Entrepreneurs/ MSME from North East Region and Sikkim

80% of the default amount (maximum Rs. 40,00,000).

3. MSE Retail Trade

50% of default amount (maximum Rs. 50,00,000).

4. Other eligible borrowers

75% of the default amount (maximum Rs. 1,50,00,000).

Facilities Offered Under CGTMSE

The Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE) offers several facilities to help and support the development of micro and small enterprises (MSEs) in India. Here are some key facilities offered under the scheme:

Loan Guarantee: The CGTMSE provides a guarantee to lenders for a portion of the loan amount (up to 85%) in case of default by the borrower. This reduces the risk for lenders and encourages them to provide loans to MSEs.
Hybrid Security: This option allows lenders to obtain collateral security for a part of the loan amount while still availing the CGTMSE guarantee for the remaining unsecured portion (up to 500 lakh).
Credit Enhancement: The CGTMSE also provides credit enhancement facilities to select NBFCs and Small Finance Banks, enabling them to access funds at lower interest rates and offer loans to MSEs at competitive rates.
Different Loan Terms: Term Loans for long-term investments, Working Capital Loans for day-to-day expenses, and Composite Loans combining both for a comprehensive financing solution. This facilitates access to finance for micro and small enterprises with reduced collateral requirements, improved creditworthiness, and competitive interest rates.
Interest Rate Subvention: The CGTMSE offers interest rate subvention schemes for specific sectors and categories of borrowers, making loans more affordable for MSEs.
Credit Counseling and Facilitation: The CGTMSE provides credit counseling and facilitation services to help MSEs prepare loan applications and understand their financial obligations.
Technology Adoption and Innovation: The CGTMSE supports initiatives that promote technology adoption and innovation among SMEs.

CGTMSE Interest Rates

While the CGTMSE Scheme doesn't directly set interest rates, it helps lenders offer competitive rates by guaranteeing a portion of the loan amount. Here's a comparison of interest rates for business loans with and without CGTMSE guarantee:

Loan Type	Without CGTMSE	With CGTMSE Guarantee
Term Loan	8.5% - 13.5%	7.5% - 12%
Working Capital Loan	9% - 14%	8% - 13%

Note: These rates are indicative and subject to change. Always check with the bank for the most up-to-date information before making any investment decisions.

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Top Banks/NBFCs Buisness Loan Interest Rates

Let’s go through the list of lenders and respective interest rates from below:

Bank/NBFC	Loan Type	Interest Rate with CGTMSE
SBI	Working Capital Loan	8.00% - 10.00%
HDFC Bank	Term Loan	8.00% - 10.00%
HDFC Bank	Working Capital Loan	8.50% - 10.50%
Axis Bank	Term Loan	8.25% - 10.25%
Axis Bank	Working Capital Loan	8.75% - 10.75%
Bajaj Finserv	Term Loan	8.75% - 10.75%
Bajaj Finserv	Working Capital Loan	9.00% - 12.00%

Note: These rates are indicative and subject to change. Always check with the bank for the most up-to-date information before making any investment decisions.

CGTMSE Charges

The CGTMSE Scheme, while offering numerous benefits to MSEs, also involves certain charges. These charges can be broadly categorized as follows:

1. Processing Fee: Charged by lenders for processing loan applications.

Ranges from 0.50% to 2.00% of the loan amount.

2. Annual Guarantee Fee (AGF): Paid by lenders to the CGTMSE for the guarantee provided.

Ranges from 0.75% to 2.00% of the guaranteed portion of the loan.

3. Other Charges:

Documentation charges, legal charges, prepayment penalties, etc.
May vary depending on the lender and loan product.

CGTMSE Scheme Eligibility

The Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE) offers various facilities to support the growth of MSEs in India. To be eligible for these benefits, businesses must meet specific criteria.

Here's a summary of the key eligibility requirements:

Enterprise Type:

Micro and Small Enterprises (MSEs) as defined by the MSMED Act( Micro, Small and Medium Enterprises Development Act), 2006.
Individual entrepreneurs, proprietorships, partnerships, private limited companies, and registered companies.

Business Activities:

Only businesses engaged in manufacturing or service activities are eligible.

Financial Performance:

Businesses should have a good financial track record that shows profitability and debt-servicing ability.
Specific financial parameters may vary depending on the lender and loan product.

Loan Amount:

The maximum loan amount eligible for CGTMSE guarantee varies depending on the type of loan and the category of the enterprise.

Collateral Requirements:

The CGTMSE guarantee reduces the need for collateral, but some lenders may still require minimal security. The level of collateral required depends on the lender, loan amount, and risk assessment of the business.

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EMI Calculation For CGTMSE Scheme

The Business Loan EMI Calculator helps you estimate the monthly installments (EMIs) you will need to pay for a loan under the Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE). This tool allows you to make informed financial decisions by providing a clear picture of your monthly obligations before applying for the loan.

Loan Amount :

₹

Interest Rate (p.a.):

Months to Pay:

Monthly EMI	₹86
Principal Amount	₹1,000
Total Interest	₹32
Total Amount	₹1,032.00

Principal Amount Interest Amount

Year	Month	Principal (A)	Interest (B)	EMI (A+B)	Balance	Loan Paid to Date (%)

Here are the key features of the CGTMSE EMI Calculator:

Input Fields: You can enter various loan parameters like loan amount, interest rate, and loan tenure.
Calculation: Based on the provided information, the calculator automatically calculates the monthly EMI amount.
Payment Schedule: You can view a detailed payment schedule showing the breakdown of each EMI into principal and interest components.
Flexibility: You can adjust the input parameters to see how they affect the EMI amount and choose the loan terms that best suit your financial situation.

Documents Required For CGTMSE Scheme

To avail of the CGTMSE Scheme, MSEs need to submit certain documents to the lender. The specific document requirements may vary depending on the lender, loan purpose, and business size. However, some common documents required include:

Form 31: Application form for the CGTMSE loan, containing details about personal information, business details, loan amount, and loan purpose.
Original salary slip for the current month
Self-attested copy of UAN (Universal Account Number) card
Self-attested copy of bank passbook
Proof of Address: Recent electricity bill, telephone bill, or rental agreement showcasing your residential address.
Proof of Identity: PAN card, Aadhaar card, or voter's ID card confirming your identity.
Proof of Business Existence: Registered business certificate, trade license, or other documents verifying your business existence.
Project Report (for term loans): Outlines project details, including purpose, financial feasibility, and projected cash flow.
Financial Statements: Audited balance sheets and income statements for the past few years (depending on loan amount and business size).
Security Documents: Collateral or security documents are required by the lender to guarantee the loan (if applicable).
Guarantor Documents (if applicable): Details and documents of the guarantor, including identity proof and financial statements.

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Features & Benefits of CGTMSE Scheme

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE Scheme) is a game-changer for micro and small businesses (MSEs) in India. It provides much-needed access to collateral-free loans, removing a major obstacle for these enterprises to thrive. Let's delve into the key features and benefits of this scheme:

Collateral Free Loan

No need to pledge any assets,
Easy for new and
unestablished businesses
to secure funding.

Guaranteed Coverage

Guaranteed coverage
of 75-85% reducing lenders
risk.

Flexible loan options

Loans for various purposes

Simple application
process

simplified online
application process,
making it quicker
and more accessible for
MSEs.

Low Interest Rates

Get lower interest rates
with banks tied up with
CGTMSE scheme

Reduced financial
risk

The guarantee coverage
mitigates risks for lenders,
potentially leading to lower
interest rates for MSEs.

How to Apply for the CGTMSE Scheme

The CGTMSE Scheme offers numerous benefits for micro and small businesses in India, but navigating the application process can be confusing. Here's a step-by-step guide to help you apply:

Eligibility Check:

Check if your business qualifies as a micro or small enterprise: Refer to the MSME Ministry guidelines for specific criteria.
Ensure your business falls under the eligible sectors covered by the CGTMSE Scheme: The scheme covers various sectors like manufacturing, services, trade, etc.

Choose a Lender:

Research and compare different lenders offering CGTMSE loans to find the best interest rates, terms, and customer service.
Consider factors like loan amount offered, processing fees, and overall reputation.

Gather Required Documents:

Form 31, UAN card, Current month's salary slip and bank passbook.
Documents like (if applicable): Proof of address, identity proof, business registration documents, project report (term loans), financial statements, collateral documents, and guarantor documents (if required).

Submit Loan Application:

Contact your chosen lender and submit the completed application form along with all required documents.
Ensure your application is complete and accurate to avoid delays in processing.

Lender Evaluation:

The lender assesses your application based on your business viability, financial stability, and creditworthiness. They may request additional information or documentation if needed.

Loan Approval:

Upon successful evaluation, the lender approves your CGTMSE loan application. You will receive a loan agreement outlining the terms and conditions.

Loan Disbursement:

Once you complete formalities like signing agreements and providing collateral (if required), the loan amount is disbursed into your bank account.

CGTMSE Guarantee:

The lender applies for the CGTMSE guarantee on your behalf.
Once approved, the CGTMSE guarantees a portion of your loan amount in case of default.

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Claim Settlement Procedure

The Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE Scheme) provides an efficient mechanism for loan claim settlement in case of borrower default. Here's a step-by-step breakdown of the claim settlement procedure:

Default Recognition: When a borrower fails to repay loan installments as per the agreed-upon schedule, the lender classifies the account as a non-performing asset (NPA).The lender initiates recovery proceedings as per its policies and CGTMSE guidelines.
Claim: After a period of 18 months from the NPA date or the last disbursement date (whichever is later), the lender can lodge a claim with the CGTMSE.The lender must submit a detailed claim form along with supporting documents like loan agreement, default notices, and recovery efforts undertaken.
Claim Verification: The CGTMSE verifies the claim submitted by the lender, reviewing all documentation and ensuring compliance with eligibility criteria. The CGTMSE may request additional information or clarifications from the lender if needed.
Claim Adjudication: If the claim is found to be valid and complete, the CGTMSE approves it for settlement. The CGTMSE determines the amount payable based on the guaranteed portion of the loan amount and applicable regulations.
Claim Settlement: The CGTMSE settles the approved claim amount in two installments: 75% of the guaranteed amount is paid as the first installment. 25% of the guaranteed amount is paid as the second installment after realizing the remaining assets of the borrower.
Recovery from Borrower: The lender continues recovery efforts against the borrower to maximize loan realization. Any amount recovered from the borrower is shared with the CGTMSE based on their claim settlement proportion.

Toll-Free Number

Use the numbers provided below to call for any claim-related information, queries, inquiries or any other assistance regarding the CGTMSE scheme:

Here are the specific timings for reaching CGTMSE through the toll-free number:

For General Queries: 10:00 AM to 18:00 PM
For Claims-Related Information: 9:45 AM to 17:45 PM

Additional Contact Information: Website: https://www.cgtmse.in/

Head Office Address: Credit Guarantee Fund Trust for Micro and Small Enterprises, 1st Floor, SIDBI, Swavalamban Bhavan, C-11, G-Block, BKC, Bandra (East), Mumbai - 400 051 Contact Numbers: (022) 6722 1553, 6722 1438, 6722 1483

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Frequently Asked Questions

The CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) Scheme provides credit guarantees to lenders for loans granted to micro and small enterprises (MSEs), encouraging banks to lend to them without requiring collateral.

By providing credit guarantees, CGTMSE reduces the risk for banks and financial institutions, making it easier for small and micro-enterprises to access loans and finance their growth aspirations.

Individuals, proprietorships, LLPs, partnerships, private limited companies, or registered companies engaged in manufacturing or service activities (excluding agriculture) are eligible for the CGTMSE scheme, subject to specific eligibility criteria set by the scheme and individual lenders.

The CGTMSE Scheme covers both term loans and working capital facilities extended to eligible micro and small enterprises, with a maximum credit cap of ₹200 lakh (Rupees Two Hundred lakh only) per borrower.

Yes, there is a limit on the loan amount that can be covered by the CGTMSE Scheme. Find more details on the same above.

Yes, Mudra loans are generally covered under the CGTMSE Scheme, but the specifics depend on the type of Mudra loan and the lending institution.

Women entrepreneurs receive a higher guarantee cover of 80% on their loans under the CGTMSE Scheme, compared to the standard coverage based on loan amount. This applies to micro and small enterprises operated and/or owned by women, and to all credits/loans in the NorthEast Region (NER) for credit facilities up to ₹50 lakh.

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