The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a joint initiative by the Ministry of Micro, Small & Medium Enterprises (MSME), Government of India, and the Small Industries Development Bank of India (SIDBI). Established to catalyze the flow of institutional credit to Micro & Small Enterprises (MSEs), the CGTMSE has been a pivotal force in the Indian financial ecosystem.

What is CGTMSE?

CGTMSE was set up to strengthen the credit delivery system and facilitate the flow of credit to the MSE sector. Its primary objective is to create access to finance for unserved, under-served, and underprivileged sectors, making finance available from conventional lenders to new generation entrepreneurs. Over the past 22 years, CGTMSE has provided guarantee cover to collateral and/or third-party guarantee-free credit facilities extended by eligible Member Lending Institutions (MLIs) to MSEs. In the financial year 2022-23, CGTMSE approved guarantees worth ₹1 lakh crore, marking a significant milestone in its journey.

Key Aspects of the CGTMSE Loan Limit:

  1. Quantum of Credit Facility: Both fund and non-fund based credit facilities (like Letters of Credit, Bank Guarantee, etc.) up to ₹500 lakh per eligible borrower can be covered under the guarantee scheme. These are extended based on project viability without the need for collateral security or third-party guarantees.
  2. Hybrid Security Product: Under this product, MLIs can obtain collateral security for a part of the credit facility. The remaining part, up to a maximum of ₹500 lakh, can be covered under the Credit Guarantee Scheme of CGTMSE.
  3. Guarantee for Credit Facility Over ₹500 lakh: While credit facilities over ₹500 lakh can be extended, the guarantee cover will be restricted to ₹500 lakh. This means the maximum credit risk borne by CGTMSE is capped at ₹375 lakh (75% of the amount in default).
  4. Guarantee/Service Fee: For credit facilities sanctioned or renewed to MSEs on or after April 01, 2023, the Annual Guarantee Fee (AGF) will be charged on the outstanding loan amount. The detailed fee structure can be found in Circular No. 221/2022-23 dated March 31, 2023.
  5. Term Loan or Working Capital Facility: Lenders can extend either a term loan or a working capital facility alone and still be eligible for a guarantee cover, provided other eligibility parameters are met.
  6. Interest Ceiling: There’s no specific ceiling on the interest to be levied on the credit facility. Any credit facility sanctioned by an eligible MLI, in line with RBI guidelines, is eligible for coverage under the CGS-I.
  7. Coverage for NPA: Credit facilities that have already become Non-Performing Assets (NPA) cannot be covered under the scheme.


The CGTMSE plays a crucial role in fostering an entrepreneurial mindset across the nation. With its guarantee schemes, it has enabled countless MSEs to access credit facilities without the burden of collateral. As India marches towards becoming an economic superpower, initiatives like CGTMSE will undoubtedly play a pivotal role in supporting and nurturing the entrepreneurial spirit of the nation.