CGTMSE Fee Structure 2026 — Complete Guide with Calculation Examples
What Is CGTMSE?
CGTMSE — the Credit Guarantee Fund Trust for Micro and Small Enterprises — is a joint initiative of the Government of India and SIDBI, established in August 2000. Its core purpose is to remove the biggest barrier MSME borrowers face: the demand for collateral security. Under the scheme, approved Member Lending Institutions (MLIs) — scheduled commercial banks, RRBs, SFBs and select NBFCs — can extend collateral-free working capital and term loans up to ₹10 crore to eligible MSMEs. The Trust then steps in as the guarantor, covering a defined percentage of the outstanding credit if the borrower defaults.
From a branch manager’s perspective, CGTMSE is not a subsidy — it is a risk-mitigation tool. When you sanction a CGTMSE-covered loan, your bank’s credit exposure is partially backstopped by the Trust’s guarantee. The borrower pays an Annual Guarantee Fee (AGF) to keep that cover active. Understanding the CGTMSE fee structure is therefore essential: it affects the all-in cost of the loan, influences whether the borrower finds the product affordable, and determines how you position it during appraisal.
CGTMSE Fee Structure 2026 — Annual Guarantee Fee (AGF) Slabs
The CGTMSE fee structure is based on two variables: the loan amount slab and the risk category of the MLI. The Trust assigns each MLI a risk category (Standard, Above Standard, Below Standard, etc.) based on the NPA profile of its CGTMSE-guaranteed portfolio. The standard rate applies to average-performing banks; better-performing banks get a discount of up to 10%, while higher-risk MLIs pay a premium of up to 70% of the standard rate.
The table below shows the standard AGF rates effective April 1, 2025 (source: cgtmse.in), expressed as % per annum:
| Credit Facility Slab | Standard AGF Rate (% p.a.) |
|---|---|
| Up to ₹10 lakh | 0.37% |
| Above ₹10 lakh – ₹50 lakh | 0.55% |
| Above ₹50 lakh – ₹1 crore | 0.60% |
| Above ₹1 crore – ₹2 crore | 0.85% |
| Above ₹2 crore – ₹5 crore | 1.00% |
| Above ₹5 crore – ₹8 crore | 1.10% |
| Above ₹8 crore – ₹10 crore | 1.20% |
Key rule on charging basis: In Year 1 the AGF is calculated on the sanctioned loan amount. From Year 2 onwards it is calculated on the outstanding principal at the start of that year. This means the fee naturally reduces as the borrower repays — an important selling point when explaining cost to the borrower.
Step-by-Step CGTMSE Fee Calculation — Real Examples
Let us walk through two practical cases so you can replicate these calculations at the branch counter.
Example 1 — Term Loan of ₹40 Lakh (Standard MLI)
Loan amount: ₹40,00,000 | Tenure: 5 years | MLI category: Standard | AGF rate: 0.55% p.a.
- Year 1 AGF = ₹40,00,000 × 0.55% = ₹22,000
- Year 2 (outstanding ₹32 lakh) = ₹32,00,000 × 0.55% = ₹17,600
- Year 3 (outstanding ₹24 lakh) = ₹24,00,000 × 0.55% = ₹13,200
- Year 4 (outstanding ₹16 lakh) = ₹16,00,000 × 0.55% = ₹8,800
- Year 5 (outstanding ₹8 lakh) = ₹8,00,000 × 0.55% = ₹4,400
- Total AGF over 5 years: ₹66,000
This fee is typically charged upfront at disbursement for Year 1 and then annually on the anniversary date. Many MLIs debit it directly from the borrower’s account.
Example 2 — Working Capital of ₹1.5 Crore (Below Standard MLI, +30% premium)
Loan amount: ₹1,50,00,000 | Facility: Cash Credit | MLI risk premium: +30% on standard rate | Base AGF rate: 0.85% (slab: above ₹1 crore – ₹2 crore, w.e.f. Apr 2025) | Effective rate: 0.85% + (30% of 0.85%) = 1.105% p.a.
- Year 1 AGF = ₹1,50,00,000 × 1.105% = ₹1,65,750
- For a cash credit, the outstanding is reviewed annually; the AGF is recalculated on the limit or outstanding at renewal, whichever is lower.
Practical tip: Always confirm your bank’s current MLI risk category with your CGTMSE nodal officer before quoting the exact fee to a borrower. The category is reviewed periodically and can change.
CGTMSE vs CGFMU — Key Differences
Loan officers often confuse CGTMSE with CGFMU (Credit Guarantee Fund for Micro Units), the scheme that covers Mudra loans. Here is a quick comparison:
| Parameter | CGTMSE | CGFMU (Mudra) |
|---|---|---|
| Administered by | CGTMSE Trust (Govt + SIDBI) | NCGTC (National Credit Guarantee Trustee Co.) |
| Borrower eligibility | Micro and Small Enterprises (manufacturing + services) | Micro units — Shishu, Kishore, Tarun (up to ₹10 lakh) |
| Maximum loan covered | ₹10 crore | ₹10 lakh (Tarun Plus up to ₹20 lakh) |
| Collateral required | Nil (collateral-free) | Nil |
| AGF paid by | Borrower (passed on by MLI) | Govt of India (no fee to borrower) |
| Guarantee cover | 75–85% of outstanding | Up to 75% (Shishu: up to 100%) |
| Suitable for | MSME term loans, working capital above ₹10 lakh | Very small business loans, first-time entrepreneurs |
Who Should Apply and How — A Practical Checklist
Not every MSME loan needs CGTMSE cover — it adds cost. Use this checklist to decide when it makes sense:
- Borrower has no collateral (or collateral is insufficient to cover the loan) — CGTMSE is the primary tool.
- Loan amount is between ₹10 lakh and ₹10 crore — below ₹10 lakh, CGFMU (Mudra) is usually more cost-effective since the borrower bears no fee.
- Enterprise is classified as Micro or Small under the MSMED Act 2006 (updated 2020 definition: manufacturing + services combined turnover and investment limits apply).
- Business activity is not on the negative list — educational institutions, self-help groups, agriculture (primary), and retail trading above ₹10 lakh were historically excluded; verify the current negative list on the CGTMSE portal.
- Borrower has a clean credit history — CGTMSE is not a substitute for due diligence; a bad credit track record will still attract rejection at the MLI level.
How to Apply — Process at a Glance
- Borrower approaches MLI with a loan proposal (business plan, ITR, GST returns, bank statements).
- MLI appraises the proposal as per its credit policy and sanctions the loan.
- MLI logs the guarantee application on the CGTMSE portal (cgtmse.in) within the stipulated time (usually 3 months from first disbursement).
- AGF is computed and debited from the borrower’s account or built into the loan cost.
- Guarantee certificate is issued by CGTMSE — this is the MLI’s cover document in case of NPA and claim filing.
The borrower does not register directly with CGTMSE. The entire process is MLI-driven. Your role as a branch manager is to ensure the guarantee application is filed on time and the AGF is collected correctly every year.
What is the CGTMSE fee for a Rs 50 lakh loan?
For a Rs 50 lakh loan (slab: above Rs 10 lakh to Rs 50 lakh), the standard Annual Guarantee Fee is 0.55% per annum. Year 1 AGF = Rs 50,00,000 x 0.55% = Rs 27,500. The fee falls each year as the borrower repays because from Year 2 it is charged on outstanding principal, not the original sanction amount.
Is the CGTMSE fee charged every year or only once?
The Annual Guarantee Fee (AGF) is charged every year for the full loan tenure. Year 1 is charged on the sanctioned amount; Year 2 onwards on outstanding principal. The rupee amount therefore reduces each year as the borrower repays, keeping the total cost manageable.
Can the CGTMSE fee be added to the loan amount?
Yes. Most banks allow the AGF to be capitalised — added to the loan and disbursed — so the borrower does not need to pay it upfront from their own funds. However, this increases the principal on which interest is also charged. Always explain this clearly to the borrower before sanction.
What happens if the CGTMSE fee is not paid on time?
If the AGF is not paid by the due date, the guarantee cover lapses for that period. A lapsed guarantee cannot be used to file a claim for defaults occurring during that window. Branch managers must diarise AGF renewal and collect or capitalise the fee before each anniversary date.
What is the difference between CGTMSE fee and bank interest rate?
The AGF is paid to the CGTMSE Trust as the cost of guarantee cover. It is separate from the bank interest rate. The all-in cost to a borrower = bank interest rate + AGF. Example: 10% bank rate + 0.55% AGF = approximately 10.55% effective annual cost before processing charges.
