CGTMSE Scheme known as Credit Guarantee Fund for Micro and Small Enterprises is a guarantee fund set by Government of India to guarantee the loans provided by banks to small enterprises and medium enterprises. The objective of the fund is to enable small and medium enterprises to avail loans from banks without any collateral security and guarantee. We have explained the CGTMSE scheme below:


Which loans or Borrowers under CGTMSE Scheme?

CGTMSE cover is available for Loans to Micro and Small Enterprises (MSE) engaged in manufacturing or service activities. Only loans upto Rs.1 crore are covered.


Which loans are not covered under CGTMSE Scheme?

CGTMSE cover is not available for Loans to enterprises engaged in Retail Trade, educational institutions, training centres, self help groups (SHGs) and joint liability groups (JLGs).

Loans given under Mudra Scheme (including to above categories) may be covered under Credit Guarantee Fund for Micro Units (CGFMU) – Read this Article


Whether any collateral security or guarantee can be taken for loans to be covered under CGTMSE Scheme?

Any facility given on the basis of collateral security or third party guarantee will be disqualified for cover under CGTMSE Scheme. Means, collateral free loan is to be granted under CGTMSE Scheme.

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What is Maximum Risk Cover under CGTMSE Scheme?

  • In case of default by the borrower, up to 75 per cent (85% for select category of borrowers), of the defaulted principal amount in respect of term credit including interest on principal for one quarter and / or outstanding working capital advances (inclusive of interest), as on the date of account becoming NPA, or as on the date of filing the suit, whichever is lower.
  • Other charges such as penal interest, commitment charge, service charge, or any other levies/ expenses does not qualify for the guarantee cover.


What is the Tenure for coverage of working capital facilities under CGTMSE?

  • The tenure for coverage of working capital facilities is 5 years, where working capital alone is covered under the scheme. In case term credit and working capital both are covered under the scheme, the tenure relating to working capital facility would match the normal repayment period of term credit.
  • CGTMSE cover is required to renewed after 5 years on a payment of applicable guarantee fee.
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Whether Second Term Loan can be covered under CGTMSE Scehme?

CGTMSE cover is available for the second term loan provided the aggregate credit does not exceed Rs.100 Lakh.
When to apply for CGTMSE cover? What is last date for applying for CGTMSE cover?

In respect of eligible Loan accounts sanctioned in a quarter, apply before close of the following quarter (for example in respect of loan sanctioned in April-June quarter, application should be submitted online before 31st September.


What to do when a CGTMSE covered turns NPA?

Inform the Trust i.e., mark the account NPA, indicate the date of classification of the account as NPA in a particular calendar quarter, by end of subsequent quarter (for example is account turned NPA on 31st August 2016, mark NPA by 31st December 2016).


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When to Lodge claim with CGTMSE?

  • There is a lock-in-period is 18 months from either the date of last disbursement of the loan or the date of payment of guarantee fee, whichever is later.
  • For loan sanctioned on or before 31.12.2012, the claims are to be lodged within a maximum period of one year from the date of NPA, if date of NPA is after the lock-in period. In case of date of NPA is within lock-in-period, claim is to be lodged within one year from the expiry of lock-in period.
  • For loan sanctioned on or after 01.01.2013, the claims are to be lodged within a maximum period of two years from the date of NPA, if date of NPA is after the lock-in period. In case of date of NPA is within lock-in-period claim is to be lodged within two years from the expiry of lock-in period.
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Where to see CGTMSE claims settlement details?

Claims settled account details can be viewed in CGTMSE portal by using Member login Id and password.


What to do when a CGTMSE covered account is closed?

Bank to immediately inform the date of closure of guaranteed accounts to CGTMSE for generating Annual Service Fee (ASF)/ Annual Guarantee Fee (AGF) on pro-rata basis up to the date of closure of accounts to avoid generation of ASF/AGF for the full year.


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Whether a CGTMSE covered can be Rephased / Rescheduled?

  • Banks may approve the proposal of rephasement/ reschedulement and intimate to the Trust the detailed terms and conditions of rephasement.
  • If as part of rephasement/ reschedulement additional credit facility is granted (within the overall eligible credit limit), the Bank is required to pay to CGTSI the guarantee fee on the additional credit facility sanctioned at the stipulated rate.
  • If the account is already guaranteed for a maximum credit limit of Rs.1 crore, no additional credit facility can be covered under CGFSI.


What if there is change in Management of borrower covered under CGTMSE?

If the new management meets eligibility criteria viz MSE status, activity etc., CGTMSE cover will continue otherwise the guarantee will be deemed to be terminated from the date of the transfer of management.


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What is the Guarantee fee under CGTMSE Scheme?

  • The Standard Rate of Guarantee Fee 1% (For woman, micro enterprise and units in north east, 0.75% for loans upto Rs.5 lakhs and 85% for loans beyond Rs.5 lakhs).
  • With effect from 1st April 2016, Risk Premium is to be added over Standard Rate on the basis of NPA portfolio of the bank under CGTMSE covered loans and Risk and claim payout ratio as per following matrix
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S.No. Risk premium on NPAs in Guaranteed portfolio Risk premium on Claim Payout Ratio
NPA Percentage Risk Premium Claim Payout Percentage Risk Premium
1 0-5% SR 0-5% SR
2 >5-10% 10% of SR >5-10% 10% of SR
3 >10-15% 15% of SR >10-15% 15% of SR
4 >15-20% 20% of SR >15-20% 20% of SR
5 >20% 25% of SR >20% 25% of SR
  • For loans sanctioned before 1st April 2016, previous rates shall apply till maturity or renewal of cover.
  • The rates will be floating and will undergo changes every year based on the NPA level and payout ratios of the concerned Bank.
  • Banks having NPA percentage as well as claim payout ratio more than 5%, the risk premium under both the categories shall be applicable to such Banks.
  • Guarantee fee is required to be paid within 30 days of demand advice.


What is the Annual service fee for CGTMSE?

MLI (Member Lending Institution/ Bank) to pay an Annual Service Fee (ASF) of 0.50% for credit facilities upto Rs.5 lakh and 0.75% for credit facilities beyond Rs.5 lakh and upto Rs.100 lakh. ASF is to be paid by before 31st May of that year.


Who will borne the CGTMSE Annual Service Fee, Bank or Borrower?

This is at the discretion of the MLI/ Bank to decide whether to recover the fee from borrower or to pay out of their own pocket.


If guarantee fee is paid and accepted by CGTMSE, will the account be covered, even if otherwise not eligible (for example a retail trade account)? 

Merely remitting of guarantee fee / Annual Service Fee to CGTMSE and acceptance of the same by CGTMSE does not entitle the loan to be covered under the guarantee scheme of CGTMSE.


Please give your suggestions in comment box below.


sunil kumar sahu · February 18, 2017 at 8:16 am

A Very good article ,i love it but could be better if you provide case study.
so please provide case study.

Amit · April 21, 2017 at 1:21 pm

Sir, does increased cover of Rs.2 crore is applicable, as bankers are still denying loans above 1 crore under CGTMSE..kindly clarify with circular reference, would be useful

Rohit · June 21, 2017 at 1:03 am

in case of default, what actions are envisaged against the beneficiary borrower

Jai · August 22, 2018 at 9:10 am

If you talk to CGTMSE help desk, they may accept the application. They sometimes do consider the geniune delays.

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