Short Description
The Credit Guarantee Scheme for Micro & Small Enterprises, operated by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), is a flagship initiative that allows Micro and Small Enterprises (MSEs) to access collateral-free credit.
Objective
Credit Flow: Catalyse the flow of institutional credit to the MSE sector.
Collateral-Free Access: Enable first-generation entrepreneurs and underprivileged segments to get loans without providing property or third-party guarantees.
Risk Mitigation: Strengthen the credit delivery system by sharing the risk of default with lenders.
Benefits / Subsidy
Benefit Type
Finance Guarantee
Coverage
75% to 90% Backed by Government Guarantee
Increased Loan Limits: Borrowers can access credit up to ₹10 crore (effective April 2025).
High Guarantee Cover: The trust covers 75% to 85% of the default amount (and up to 90% for women-led enterprises).
Reduced Costs: The annual guarantee fee has been lowered to as little as 0.37% per annum.
Hybrid Security: Borrowers can provide collateral for one part of the loan while the remaining part (up to ₹10 crore) is covered by the scheme.
Eligibility
Enterprise Type: Both new and existing Micro and Small Enterprises as defined under the MSMED Act, 2006.
Sectors: Manufacturing, service activities, and retail/wholesale trading.
Exclusions: Agriculture, educational institutions, and Self-Help Groups (SHGs) are generally ineligible.
Status: The borrower must not be a defaulter with any financial institution.
Documents Required
Identity & Registration: Udyam Registration Certificate (mandatory), PAN Card (mandatory for loans >₹5 lakh), and Aadhaar.
Business Proof: Certificate of Incorporation, Partnership Deed, or business license.
Financial Records: Income Tax Returns (ITR), recent bank statements, and GST registration.
Project Details: A detailed Project Report or Business Plan including projected financials for new units.
Application Process
Selection: Choose a registered Member Lending Institution (MLI) such as public/private banks (e.g., SBI, HDFC), NBFCs, or Small Finance Banks.
Submission: Submit your business plan and required documents to the MLI.
Sanction: The lender evaluates your proposal's viability and sanctions the loan.
Guarantee Application: After sanctioning, the lender applies for guarantee cover on the CGTMSE Online Portal.
Fee Payment: Upon approval, the borrower (or lender) pays the annual guarantee fee to activate the cover, followed by loan disbursement.
Nodal Agency
The scheme is implemented by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). This trust was jointly established by:
- The Ministry of Micro, Small & Medium Enterprises (MSME), Government of India.
- The Small Industries Development Bank of India (SIDBI).
