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CGTMSE Scheme

cgtmse scheme

Credit Guarantee Fund Trust for Micro and Small Enterprises, CGTMSE is a scheme that is introduced by the government of India, by the Ministry of Micro, Small and Medium Enterprises and the Small Industries and Development Bank of India, together in tandem. The biggest objective of introducing this scheme was to give a kickstart to micro, small and medium enterprises in the country and ensure they have and need the capital required for their business. 

One of the biggest challenges new enterprises face is taking on a loan or credit from a bank without high interest rates or keeping some asset as a mortgage. To tackle this issue, the Credit Guarantee Fund Trust for Micro and Small Enterprises, CGTMSE was introduced. Through this scheme, micro, small and medium enterprises can avail credit or a loan from banks through easier means and hardly any paperwork. 

CGTMSE Full Form? 

The full form of CGTMSE is the Credit Guarantee Trust Fund for Micro and Small Enterprises. This scheme was introduced by the Ministry of Micro, Small and Medium Enterprises, and SIDBI, Small Industries and Development Bank of India. 

What is CGTMSE? 

Credit Guarantee Trust Fund of Small and Medium Enterprises is a scheme introduced for micro and small enterprises to avail a loan or credit without a big hassle. The main objective of this scheme is to provide mortgage free loans to small business owners for a low interest rate. 

Since small-time business owners do not have a huge reliable credit score, many times they are faced with high interest rates from banks due to which they cannot take the loan required to either start their business or expand their business. To combat this issue, the governing bodies introduced the CGTMSE scheme for enterprises wherein they are eligible for a loan at low-interest rates and the guarantee is taken by the governing bodies in case of default. 

The main feature under Credit Guarantee Trust Fund for Micro and Small Enterprises, CGTMSE is the collateral-free loans that small and medium enterprises can avail. Third party guarantees are also not required to avail of the benefits of the CGTMSE scheme. 

The government launched the Credit Guarantee Trust Fund for Micro and Small Enterprises to give a boost to the street vendors and hawkers. The main objective of the CGTMSE scheme is to strengthen the credit delivery system in India and facilitate the flow of credit to micro, small and medium enterprises. 

The CGTMSE scheme is useful for enterprises that require a loan, but the scheme is also useful for the lending institutions that would otherwise not be able to lend to such enterprises. The CGTMSE scheme provides graded guarantee coverage to the member lending institutions to enable them to extend credit facilities to Street Vendors and other micro and small enterprises to meet their working capital requirements.

Hence, the scheme is a win-win from both ends, the micro small and medium enterprises and also from the point of view of the lending institutions who provide the required capital. 

What are the features and highlights of Credit Guarantee Fund Trust for Micro and Small Enterprises? 

As mentioned above, the CGTMSE scheme is a collateral-free credit or loan requirement that is provided to micro, small and medium enterprises mainly to meet their working capital requirements. Due to this, some major highlights and features are very advantageous to those who provide the scheme and those who avail of the scheme. 

The highlights of the CGTMSE scheme are: 

  • The CGTMSE scheme provides a guarantee for credit facilities that do not have collateral security and a third-party guarantee. This means the governing bodies take the guarantee for the credit, making the process easier for the enterprises who require the credit. 
  • This scheme is available for micro, small and medium enterprises who are in the manufacturing and service industries. 
  • Enterprises in the manufacturing and service industry can avail of a credit line of up to INR 2 crore under the CGTMSE scheme. 
  • In the case of retail participation and them requiring a line of credit, the maximum amount of credit they can get under this scheme is INR 1 crore. 
  • While the majority of the credit or loan is collateral-free, there is some amount that needs to be backed by assets. In the case of manufacturing and service, 75% of the credit not covered by collateral security is guaranteed. In the case of retail trade, the percentage is up to 50%. 
  • The credit line or loans can be available from lending institutions that have tied up with the governing bodies and the CGTMSE scheme. Some of the lending institutions can be Non-Banking Financial companies, NBFCs, Regional Rural Banks, SIDBI etc. 
  • The interest rate offered by the lending institutions is low compared to the general credits and loans that are available in the market due to the main objective of the scheme of providing collateral-free low-interest rate loans. 

What is the eligibility criteria for the CGTMSE? 

Since this scheme caters to the micro, small and medium enterprises industries and for the upliftment of street vendors and hawkers, they need to ensure they’re fulfilling the eligibility criteria by being in the right business and industry. 

Apart from the borrowers that need to ensure they are in the eligibility criteria, there are also eligibility criteria for the lending institutions as they need to ensure they’re a perfect match for the borrowers. 

Eligibility criteria for borrowers for credit guarantee scheme: 

  • All micro, small and medium enterprises that are already in business or new and are just starting are eligible for the CGTMSE scheme 
  • A business that is in the manufacturing and service industries are eligible for the scheme along with business that are in the retail trade sections. 
  • However, businesses that are in Educational or training institutions and the agriculture business cannot avail of a loan under this scheme. 

Eligibility criteria for the lenders for credit guarantee scheme: 

Certain financial institutions can be eligible for the Credit Guarantee Fund Trust for Micro and Small Enterprises. Another important criterion the lender should keep in mind is that the lender should only fund viable projects that seem doable and secure the funding only on the primary security of the financed assets. 

Some of the eligible lending institutions are: 

  • Public Sector Undertaking 
  • Private Banks 
  • Non-Banking Financial Company, NBFCs
  • Regional Rural Banks 
  • National Small Industries Corporation, NSIC
  • Small Industries Development Bank of India, SIDBI 

What is the break up of the maximum guarantee available and how much is it for the CGTMSE scheme? 

As mentioned, while the loans are meant to be collateral-free loans, there is some percentage of the assets that the borrowers need to have for some credit criteria. This is different for women enterprises, for manufacturing and services industries and even different for the retail section. 

Industry Up to 5 lakhs From 5 lakhs to 50 lakhs Above 50 lakh to 200 lakh
Micro Enterprises 85% of the amount in default or to a maximum of INR 4.25 lakhs 75% of the amount in default or to a maximum of INR 37.5 lakhs 




75% of the amount in default or to a maximum of INR 150 lakhs 
Women-Led Enterprises/ Business located in North East, except for Sikkim 80% of the amount in default subject to a maximum of INR 40 lakhs 
All other categories 75% of the amount in default or to a maximum of INR 37.5 lakhs 

FAQs about CGTMSE

  1. What is the full form of CGTMSE? 

CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises 

  1. Is there a fee for CGTMSE and how much is it? 

Yes. There is a fee for CGTMSE. The CGTMSE fee is 0.5% of the guarantee amount for a credit up to INR 5 lakhs. And for a credit guarantee amount of INR 5 lakhs to INR 1 crore, the fee is 0.75% of the guaranteed amount. 

  1. Who are eligible to borrow from the CGTMSE scheme? 

All existing and new micro, small and medium enterprises can avail of credit under the CGTMSE scheme. The businesses need to be in the manufacturing or services industries. They can also be in the retail trade. 

  1. Is there a lock-in period for CGTMSE? 

Yes. There is a lock-in period for a period of 18 months once you avail of credit under the CGTMSE scheme. 

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