CGTMSE Collateral Free Loan — Credit Guarantee Fund Trust for MSEs
Source: cgtmse.in · msme.gov.in · Last verified: April 2026
What is CGTMSE?
CGTMSE collateral free loan eligibility is open to all new and existing Micro and Small Enterprises in India. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was jointly established in August 2000 by the Ministry of MSME, Government of India and the Small Industries Development Bank of India (SIDBI). The scheme does not provide loans directly — instead it provides a government-backed guarantee to banks and NBFCs, enabling them to lend up to ₹10 Crore to MSEs without asking for collateral or third party guarantees. If the borrower defaults, CGTMSE compensates the bank for the guaranteed portion — reducing the bank’s risk and making it easier for small businesses to get loans. In FY 2022-23, CGTMSE approved guarantees worth ₹1 lakh crore in a single year — making it one of India’s most impactful financial inclusion programmes.
How CGTMSE Works ?
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Guarantee Coverage Matrix
CGTMSE Collateral Free Loan :Who Is Eligible / Who Is Not ?
How to Apply?
Key Facts
loan covered
for women entrepreneurs
in FY 2022-23
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Documents Required for CGTMSE
Frequently asked questions — CGTMSE
Everything you need to know about CGTMSE collateral-free loans — how the guarantee works, eligibility, coverage, and how to apply.
What is CGTMSE?
CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises. It was jointly set up in August 2000 by the Ministry of MSME, Government of India and SIDBI (Small Industries Development Bank of India). CGTMSE does not give loans directly. Instead, it provides a government-backed guarantee to banks and NBFCs, enabling them to lend up to ₹10 crore to Micro and Small Enterprises without requiring any collateral or third-party guarantor.
How does CGTMSE work in simple terms?
Think of CGTMSE as a silent guarantor. When you apply for a business loan at a bank, the bank is worried about risk — what if you cannot repay? CGTMSE steps in and tells the bank: “We will cover 75% to 90% of your loss if this borrower defaults.” With this assurance, the bank lends to you without asking for property or a guarantor. You repay the bank normally. CGTMSE only acts if you default.
What is the maximum loan amount under CGTMSE?
CGTMSE provides guarantee cover for loans up to ₹10 crore per borrowing enterprise. This covers both term loans and working capital loans. Loans above ₹10 crore are outside the CGTMSE guarantee framework and would require collateral through other means.
What is the difference between CGTMSE and Mudra Loan?
- Mudra Loan is a scheme where the government enables banks to give small loans (up to ₹20 lakh) to micro businesses. It has its own separate guarantee mechanism.
- CGTMSE is a guarantee framework for larger loans — up to ₹10 crore — for Micro and Small Enterprises. It is not a loan product itself, but a credit guarantee that enables banks to lend without collateral.
For loans up to ₹20 lakh, Mudra is simpler. For larger business loans without collateral, CGTMSE is the right route.
What percentage of the loan does CGTMSE guarantee?
CGTMSE guarantees between 75% and 90% of the loan amount depending on your category:
MSEs in Identified Credit Deficient Districts (ICDD) get an additional 5% on top of the applicable rate.
Does CGTMSE charge any fee?
Yes. CGTMSE charges an Annual Guarantee Fee (AGF) on the outstanding loan amount. This fee is paid by the bank, but is typically passed on to the borrower as part of the loan cost. The fee rate varies by loan size and borrower category — it generally ranges from 0.37% to 1.35% per annum on the outstanding balance. Women entrepreneurs and SC/ST borrowers usually get a lower fee rate. Always ask your bank to disclose the exact AGF before signing the loan.
What is an Identified Credit Deficient District (ICDD) and how does it help?
CGTMSE identifies districts across India where formal credit flow to MSEs is particularly low. These are called Identified Credit Deficient Districts (ICDD). MSEs in these districts get an additional 5% guarantee coverage over the standard rate. For example, a general category borrower normally gets 75% coverage — in an ICDD district, they get 80%. Check with your bank or at cgtmse.in whether your district qualifies.
Who is eligible for a CGTMSE-covered loan?
- New and existing Micro and Small Enterprises (MSEs)
- Businesses in manufacturing, service, and trading sectors
- Small road and water transport operators
- All service sector activities under the MSMED Act 2006
- Businesses with a valid Udyam Registration number (mandatory)
- Women, SC/ST, PwD, and Transgender-owned businesses (higher coverage)
- Businesses already supported under other state or national schemes
Who is NOT eligible for CGTMSE coverage?
The following are excluded from CGTMSE coverage:
- Agriculture and allied activities
- Self Help Groups (SHGs) and Joint Liability Groups
- Loans already covered under ECGC or any other guarantee scheme
- Credit already backed by collateral or a third-party guarantee
- Accounts declared as Fraud or Wilful Defaulter
- Loans that have already turned NPA (Non-Performing Asset)
- Educational and training institutions
Is Udyam Registration mandatory for CGTMSE?
Yes. Udyam Registration is mandatory for CGTMSE coverage. Without a valid Udyam Registration number, your loan cannot be covered under the CGTMSE guarantee scheme. Register for free at udyamregistration.gov.in before approaching your bank.
Can a Medium Enterprise (not just Micro/Small) get CGTMSE coverage?
No. CGTMSE coverage under CGS-I is available only to Micro and Small Enterprises as defined under the MSMED Act. Medium enterprises do not qualify for this guarantee scheme. However, CGTMSE has a separate scheme — CGS-II — for retail trade and some other categories. Confirm with your bank for applicable coverage.
How do I apply for a CGTMSE collateral-free loan?
You do not apply to CGTMSE directly. The process is: (1) Complete your Udyam Registration, (2) Approach any CGTMSE member bank or NBFC with your documents, (3) Apply for a business loan and specifically ask the bank to cover it under the CGTMSE scheme, (4) The bank evaluates your application and applies to CGTMSE for the guarantee, (5) Once approved, the loan is disbursed without requiring collateral. Find member lenders at cgtmse.in.
What documents are needed for a CGTMSE loan?
- Identity proof: Aadhaar, PAN, Voter ID or Passport
- Address proof: Aadhaar, utility bill or rent agreement
- Udyam Registration certificate (mandatory)
- PAN card (mandatory for loans above ₹5 lakh)
- Last 6 months bank statements
- Business plan / project report (showing viability)
- Business proof: GST certificate, trade licence or shop establishment certificate
- Passport-size photographs
- Category certificate: SC/ST/OBC/Women/PwD if applying for higher coverage
Documents are submitted to your bank, not to CGTMSE directly. Requirements may vary by lender.
Which banks offer CGTMSE-covered loans?
All scheduled commercial banks, Regional Rural Banks (RRBs), Small Finance Banks, and eligible NBFCs that are registered as CGTMSE member lending institutions (MLIs) can offer CGTMSE-covered loans. This includes major public sector banks like SBI, Bank of Baroda, and Punjab National Bank, as well as private banks and many NBFCs. You can find the full list of MLIs at cgtmse.in.
If I default on a CGTMSE loan, what happens?
If you default, the bank invokes the CGTMSE guarantee and CGTMSE compensates the bank for 75% to 90% of the outstanding loan amount (depending on your category). However, this does not mean you are free of liability. CGTMSE and the bank will still pursue recovery from you. Your credit score will be severely impacted, and legal recovery proceedings may follow. Defaulting on a CGTMSE loan also makes you ineligible for future CGTMSE-covered loans.
Disclaimer: This page provides general guidance on CGTMSE collateral free loan eligibility for informational purposes only. Loan approval is subject to the bank’s assessment and CGTMSE guarantee approval. Always verify current scheme details at cgtmse.in before applying.
Source: cgtmse.in · msme.gov.in · Ministry of MSME, Government of India