CGTMSE Scheme 2026: Collateral-Free Loan up to ₹10 Crore

CGTMSE is not a loan you apply for; it is a government-backed guarantee that lets a bank lend to a micro or small enterprise without collateral or a third-party guarantor. As of October 2026 the scheme is active: it can cover credit of up to ₹10 crore per borrower, with 75% to 90% of the lender's loss guaranteed, in return for an annual guarantee fee that starts at 0.37%. You ask your bank for a business loan "under CGTMSE", and the bank takes the cover.

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is set up by the Ministry of MSME and SIDBI. The figures below are from the CGTMSE scheme document as updated on 1 April 2025, and RBI's MSME lending directions as updated on 9 February 2026.

How the CGTMSE guarantee works

1. You apply to a bank or NBFC for a term loan, working capital or both, for a new or existing micro or small enterprise.
2. The lender appraises your proposal on its normal terms and sanctions it without collateral or a third-party guarantee.
3. The lender applies to CGTMSE for guarantee cover and pays an annual guarantee fee (AGF). The scheme lets the lender recover this fee from you.
4. If the loan turns bad and recovery fails, the lender claims the guaranteed share of its loss from CGTMSE.

You still repay the full loan at the interest rate the bank charges. CGTMSE removes the collateral, not the interest.

Who is eligible

• Micro and small enterprises, new or existing, in manufacturing, services or retail and wholesale trade. Educational and training institutions are also eligible.
• Classification follows the MSME definition, so registering on Udyam helps; see Udyam registration benefits for MSME loans.
• The loan must be from a member lending institution: public and private sector banks, foreign banks, select financial institutions and NBFCs, small finance banks, RRBs, co-operative banks and eligible microfinance institutions.
• Not eligible: loans already covered by another government or insurance guarantee, loans already guaranteed through NCGTC, and borrowers whose earlier CGTMSE guarantee was invoked and who have not repaid the dues.

Limits, coverage and fees as of October 2026

Guarantee ceiling per borrower

Extent of guarantee cover (guarantees approved from 1 April 2025)

Units in credit-deficient districts identified by RBI get 5 percentage points more cover. The higher category rates apply to the smaller loan slabs; for large loans the lender will tell you which rate applies.

Annual guarantee fee (standard rate, inclusive of GST)

The actual rate depends on the lender's claims record: lenders with a good portfolio get 10% off, and others pay a risk premium of 15% to 70% over the standard rate. Women, SC/ST, PwD, transgender and Agniveer entrepreneurs get a 10% discount; units in the North East (up to ₹50 lakh), aspirational districts and ZED-certified MSEs get further 10% discounts, up to a combined maximum of 30%. The fee is charged on the loan amount in the first year and on the outstanding amount after that.

Worked example: fee on a ₹40 lakh loan

A small packaging unit borrows a ₹40 lakh term loan over 5 years at an illustrative 10%, covered by CGTMSE at the standard 0.55% fee.

• EMI = P × r × (1 + r)^n / [(1 + r)^n − 1], with r = 10 / 12 / 100 and n = 60 = ₹84,988
• Total interest over 5 years = about ₹10,99,291

If the bank passes the full fee on, the guarantee adds about ₹70,000 to the ₹11 lakh interest cost, roughly 6% more. For a woman-owned unit with a 10% fee discount, the first-year fee would be about ₹19,800. Compare that with the cost and delay of pledging property. Model your loan in the EMI calculator.

How to get a CGTMSE-covered loan

1. Register on Udyam and keep your GST returns, bank statements and ITRs ready.
2. Prepare a project report or working capital estimate with realistic cash flow.
3. Apply at a bank or NBFC branch, or online on the Jan Samarth portal, and ask specifically for coverage under CGTMSE.
4. Ask for the Key Fact Statement and check whether the guarantee fee is charged to you, the interest rate and any processing fee.
5. Check for collateral demands. If a fully CGTMSE-covered loan is sanctioned, the bank should not take collateral or a personal guarantee from a third party. For MSE loans up to ₹20 lakh sanctioned from 1 April 2026, RBI does not allow collateral anyway, and lenders may go up to ₹25 lakh for units with a good track record.

CGTMSE also backs other schemes: PM Vishwakarma and PM SVANidhi loans carry CGTMSE guarantees with the fee paid by the government. See PM Vishwakarma Yojana and the Mudra Tarun loan scheme.

Why CGTMSE loans get rejected

• The bank's credit appraisal fails. The guarantee covers loss, not a weak plan. Low cash flow or a high existing EMI burden is the commonest reason.
• Poor credit history. A default, settlement or write-off on your CIBIL or CIBIL MSME Rank report. See CIBIL MSME Rank and business credit score.
• Activity or entity not eligible, such as a medium enterprise or a loan already covered by another guarantee.
• Earlier CGTMSE claim unpaid. If a lender invoked a past guarantee on your loan and dues remain, fresh cover is not available.

How to complain

Complain in writing to the branch and then to the bank's grievance redressal officer, mentioning CGTMSE and the RBI collateral rule if relevant. RBI requires a credit decision within 14 working days for MSE loans up to ₹25 lakh. If the lender does not resolve it in 30 days, file with the RBI Integrated Ombudsman at cms.rbi.org.in. For delays on government-backed schemes, use pgportal.gov.in.

Do not pay anyone who offers to "get CGTMSE approval" for a fee. Only lenders can apply for the guarantee, and the only charges are the guarantee fee and the lender's disclosed fees.

Key takeaways

• CGTMSE is a guarantee to your lender, not a loan; you apply to a bank or NBFC for a collateral-free MSE loan under it.
• Cover goes up to ₹10 crore per borrower, with 75% to 90% of the loss guaranteed, higher for women, SC/ST and micro units.
• The annual fee starts at 0.37% (up to ₹10 lakh) and rises to 1.20% (₹8-10 crore); a ₹40 lakh, 5-year loan pays about ₹70,000 in total at 0.55%.
• RBI bars collateral on MSE loans up to ₹20 lakh sanctioned from 1 April 2026.
• The guarantee does not cancel your debt; a default still hurts your credit and blocks future cover.