CGTMSE

Overview

Collateral-free credit support for Micro and Small Enterprises. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), established by the Government of India and SIDBI, facilitates easier access to institutional credit for eligible Micro and Small Enterprises.

Under the Scheme

• The loan is sanctioned and disbursed by an eligible bank, NBFC or financial institution.
• CGTMSE provides guarantee cover to the lending institution.
• Eligible credit facilities may be considered without collateral security or third-party guarantee.
• Both new and existing Micro and Small Enterprises may apply.
• Approval remains subject to the lender’s credit appraisal, commercial viability and applicable CGTMSE conditions.

Important: CGTMSE does not directly provide any loan, subsidy or financial assistance to an enterprise. It provides guarantee protection to registered Member Lending Institutions.

Key features

• Eligible enterprises: Micro and Small Enterprises engaged in eligible manufacturing, service and trading activities
• Eligible facilities: Term Loan, Working Capital, Composite Credit and eligible non-fund-based facilities
• Maximum guarantee ceiling through eligible banks under CGS-I: up to ₹10 crore per borrower
• Maximum credit facility through eligible NBFCs under CGS-II: up to ₹5 crore per borrower
• Guarantee coverage: generally between 75% and 90% of the eligible credit exposure, depending upon the borrower category, location and applicable Scheme provisions
• Primary security: assets created out of the credit facility are generally required as primary security
• Collateral: ordinarily not required for the covered credit facility; partial collateral may be accepted under the Hybrid Security Model
• Registration: valid Udyam Registration is mandatory
• Existing facilities: certain existing standard and regular credit facilities may also be considered, subject to prescribed conditions

Who can benefit?

The Scheme may be suitable for:

• Manufacturing units
• Service enterprises
• Retail and wholesale trading businesses
• Educational and training institutions
• Small transport operators
• Women-led enterprises
• SC/ST and PwD entrepreneurs
• ZED-certified enterprises
• Enterprises situated in Aspirational Districts, Identified Credit Deficient Districts and specified regions
• First-generation entrepreneurs having a commercially viable project but inadequate collateral security

Businesses and borrowers not covered

The following are generally outside the regular CGTMSE eligibility framework:

• Agricultural activities
• Self-Help Groups (SHGs)
• Joint Liability Groups (JLGs)
• Enterprises classified as Medium Enterprises
• Activities that do not qualify as eligible Micro or Small Enterprises
• Businesses that have ceased operations
• Loan accounts already classified as NPA
• Credit facilities that are irregular or under prohibited SMA/restructuring conditions
• Facilities already covered under another Government, insurance, guarantee or indemnity scheme, to the extent of such coverage
• Facilities already guaranteed through the National Credit Guarantee Trustee Company Ltd. (NCGTC), where dual coverage is not permissible
• Credit facilities not complying with applicable RBI or CGTMSE norms
• Proposals that are not commercially or financially viable in the lender’s assessment

Retail and wholesale trading, as well as educational and training institutions, are presently eligible activities and should not be treated as excluded businesses.

Credit facilities covered

Subject to the Scheme conditions, CGTMSE support may be available for:

• Term Loan
• Working Capital
• Composite Credit
• Eligible fund-based facilities
• Eligible non-fund-based facilities, such as Bank Guarantees and Letters of Credit

Coverage limits

Through eligible banks under CGS-I. Guarantee coverage may be available up to ₹10 crore per eligible borrower, subject to the lender’s category and Scheme conditions.

Through eligible NBFCs under CGS-II. Eligible credit facilities may be covered up to ₹5 crore per borrower, subject to the applicable CGS-II provisions.

A lender may sanction a higher loan; however, CGTMSE protection will remain restricted to the prescribed guarantee ceiling.

Extent of guarantee cover

Depending upon the borrower’s category, location and amount of credit, the guarantee may generally cover between 75% and 90% of the eligible exposure. Higher coverage may be available to specified categories, including:

• Women entrepreneurs
• SC/ST entrepreneurs
• Persons with Disabilities
• Agniveer-promoted enterprises
• ZED-certified enterprises
• Enterprises in Aspirational Districts
• Enterprises in Identified Credit Deficient Districts
• Enterprises in specified regions

The percentage represents the lender’s guarantee protection. It is not a subsidy or waiver of the borrower’s repayment obligation.

Collateral and guarantee fee

CGTMSE primarily supports credit without collateral or third-party guarantee. However, proposals can also be considered under the Hybrid Security Model.

Guarantee fee under CGS-I: 0.37% to 1.20% per annum.

Banks and NBFCs eligible under CGTMSE

CGTMSE coverage is available only where the loan is provided by a lender registered as a Member Lending Institution (MLI).

Eligible lending categories

• Public Sector Banks
• Private Sector Banks
• Foreign Banks
• Regional Rural Banks
• Small Finance Banks
• Selected Financial Institutions
• Scheduled Urban Co-operative Banks
• Other eligible Co-operative Banks
• Registered Microfinance Institutions
• CGTMSE-registered NBFCs

The list of registered lenders is revised periodically. Eligibility must therefore be verified from the current CGTMSE list before submitting an application.

How we can assist

dCorpo Biz Solutions Pvt. Ltd. can provide professional assistance in:

• Preliminary CGTMSE eligibility assessment
• Assessment of the appropriate loan structure
• Preparation and review of the Detailed Project Report
• Financial projections and funding requirement analysis
• Identification of suitable banks, NBFCs and lending channels
• Preparation of the loan application and supporting documents
• Coordination and follow-up with the lending institution
• Evaluation of CGTMSE and Hybrid Security options
• Post-sanction compliance and documentation support

Disclaimer

CGTMSE guarantee coverage is not an automatic entitlement or an assurance of loan sanction. The lending institution independently evaluates the borrower’s creditworthiness, repayment capacity, project viability, documentation and compliance with its internal credit policy. Scheme limits, guarantee coverage, fees and eligibility conditions are subject to amendments issued by CGTMSE, RBI and the Government of India.