Help us personalize your experience
Providing accessible bank credit without the complexities of collateral or third-party assurances would serve as a significant form of assistance for aspiring initial entrepreneurs in achieving their goal of establishing their own Micro and Small Enterprise (MSE). With this goal in mind, the Ministry of Micro, Small & Medium Enterprises (MSME) under the Government of India introduced the Credit Guarantee Scheme (CGS). The scheme aims to enhance the credit distribution mechanism and streamline the provision of credit to the MSE sector. To put this scheme into action, the Government of India, in collaboration with SIDBI, established the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
Interest Rates | As per RBI’s Guidelines is eligible for coverage under CGTMSE |
Eligible Activities | · Manufacturing and Services including Retail trade is allowed · Educational and Training institutions, Self Help Groups (SHGs), and agriculture-related activities are not eligible |
Loan Amount | · For Micro and Small Enterprises (MSEs)– Credit facility up to Rs. 500 lakh can be covered on an outstanding basis · For Regional Rural Banks (RRBs) and Select Financial Institutions credit facilities up to Rs. 50 lakh is allowed |
Guarantee Coverage | From 75% – 85% (50% Coverage for retail activity) |
Collateral / Third Party Guarantee | Not required |
Eligible Member Lending Institutions (MLIs) | More than 100: PSUs, NBFCs, RRBs, Private Banks, SUCBs, Fls, SFBs, and Foreign Banks |
Annual Guarantee Fee for amount up to Rs. 1 crore | Fee revised from 2% and reduced to as low as 0.37% |
a) The trust guarantees up to 75% of the defaulted principal amount (up to 85% of the defaulted principal amount for a select category of borrowers). The cover comes with a maximum guarantee cap of Rs. 37.50 lakh for the credit facilities up to Rs. 50 lakh.
b) The term credit including interest on the principal is covered for a period of one-quarter and/or outstanding capital advances including the interest, as on the date of the account becoming a Non-Performing Asset (NPA) or as on the date of filing the suit (whichever is lower).
c) Other charges, such as penal interest, commitment charge, service charge, or any other levy/ expenses do not qualify for the guarantee cover.
Category | Maximum extent of Guarantee Coverage | ||
where guaranteed credit facility is | |||
Upto ₹ 5 lakh | Above ₹ 5 lakh & upto ₹ 50 lakh | Above ₹ 50 lakh & upto ₹ 500 lakh | |
Micro Enterprises | 85% | 75% | 75% |
MSEs located in North East Region (incl. Sikkim, UT of Jammu & Kashmir and UT of Ladakh) | 80% | ||
Women entrepreneurs / SC/ST entrepreneurs / MSEs situated in Aspirational District / ZED certified MSEs / Person with Disability (PwD) / MSE promoted by Agniveers | 85% | ||
All other category of borrowers | 75% | ||
* source: www.cgtmse.in
Eligible Borrowers – All Existing and New Micro and Small Enterprises (MSEs)
Lending Institutions offering funds under CGTSME Scheme – Scheduled Commercial Banks, Regional Rural Banks, Small Finance Banks, Non-banking Financial Companies, Small Industrial Development Bank of India, National Small Industries Corporation, North Eastern Development Finance Corporation Ltd.
*Educational institutions, agriculture, training institutions, and Self-Help Groups (SHGs) are not eligible for guarantee cover under CGTMSE.
Documents Required for availing loan under CGTMSE Scheme
Duly filled CGTMSE loan application form with passport-sized photographs
Business Incorporation or Company Registration Certificate
Business Project Report
CGTMSE Loan Coverage Letter
Copy of loan approval from the Bank
Any other document required by the Bank
Entities eligible for coverage under the scheme include MSME units such as Individuals / Proprietorships, LLPs, Partnerships, Private Limited Companies, or registered companies.
MSME borrowers/entities under stress, categorized as SMA2 and NPA accounts, eligible for restructuring according to RBI guidelines, and commercially viable per the assessment of lending institutions, can avail the Scheme's benefits.
The Scheme remains in effect for a maximum of 10 years from the date of availing the guarantee or until an aggregate guarantee amount of ₹20,000 crore is approved, or until the scheme's validity expires.
Yes, promoters need to contribute 10% of the sub-debt amount as collateral.
Accounts labeled as Fraud/Willful default will not be considered eligible for the scheme.
Yes, MSME accounts subject to recovery proceedings, including actions like SARFAESI Sec. 13(2), 13(4), DRT, suit filing, or restructuring, can be considered based on the viability assessment according to RBI's restructuring guidelines.
If a borrower has existing limits with multiple lenders, they can utilize the CGSSD through a single lender. The lending MLI should obtain a declaration from the borrower about their other banking arrangements and non-utilization of funding under the scheme from other lenders.
No, it is not required for existing loans to be covered by guarantee schemes like CGFMU or CGTMSE to access sub-debt under DAF-SDSM.
The sub-debt facility's tenor under DAF-SDSM will align with the lender-defined repayment schedule, up to a maximum of 10 years.
Yes, the applicable interest rate will adhere to the existing RBI guidelines.
The maximum tenor for loans under CGSSD is 10 years.
Yes, a maximum moratorium of 7 years can be applied to principal payments. During this period, only interest will be paid. Principal repayment is then required within 3 years after the moratorium ends.
Yes, prepayment of loan/credit facilities is allowed without any additional charge.
No, businesses must be operational and in running condition to be eligible for the sub-debt scheme.
No, the scheme provides funding to the promoters of the MSME unit, not to the entity itself.
Accounts with aggregate exposure above ₹25 Crore can be restructured upon asset class down-gradation, including NPAs.
For entities exempt from mandatory audits, lenders can use a CA's certificate or the latest ITR return to calculate promoter equity/debt contribution.
Only accounts classified as SMA-2 or NPA as of April 30, 2020, are eligible for additional finance under the scheme.
Sub-debt scheme loans can be extended to management committee executives of registered Trusts/Societies/HUFs, provided they fulfill eligibility criteria and meet commercial judgment standards.
Yes, the borrower's 10% contribution should be in the form of cash collateral.
Accounts opened after March 31, 2018, are not eligible under the Scheme.
Accounts eligible for restructuring, including those restructured before CGSSD's introduction, can be covered, and such assistance is not considered repeated restructuring.
"Regular in operation" pertains to the consistent functioning of the MSME unit during certain fiscal years, irrespective of transactions in their bank accounts.
No, accounts opened after January 1, 2016, are not eligible under the Scheme.
A Chartered Accountant's certificate is not necessary. However, the lending MLI should ensure that the sub-debt/credit released to the promoter is reinvested as equity/quasi equity/sub-debt in the MSME unit.
The scheme is applicable to MSMEs with accounts that were standard as of January 1, 2016, and had regular operations during specific fiscal years, subject to viability assessment by MLI. This includes accounts in regular operation or as NPAs during FY 2016-17, 2017-18, 2018-19, and 2019-20, even if they were not in regular operation during FY 2020-21 & FY 2021-22.
Fill in the form below and our team will get in touch with you shortly.