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CGTMSE

Credit Guarantee Scheme

Last Updated 27th Nov 2020

CGTMSE or Credit Guarantee Fund Scheme provides financial assistance to micro, small and medium enterprises for availing a loan upto Rs. 2 Crores without any collateral or third-party guarantee

CGTMSE Full Form Credit Guarantee Fund Trust for Micro and Small Enterprises
Maximum Loan Amount ₹ 2 Cr
Eligible Institutions Public/Private/Foreign/ Rural Banks registered as MLIs (Member Lending Institutions) of the Trust.
Maximum Guarantee Cover ₹ 1.50 Cr(Small Enterprises)
₹ 4 Cr(Others)
Fee and Charges 1% of loan amount

Credit Guarantee Fund Scheme for Micro and Small Enterprises

CGTMSE or Credit Guarantee Fund Scheme for Micro and Small Enterprises was introduced by the government on August 30, 2000, to provide collateral-free credit to micro, small and medium enterprises at a lower rate of interest. Under this scheme, the Ministry of Micro, Small and Medium Enterprises, GoI and Small Industries Development Bank of India (SIDBI) established a Trust named Credit Guarantee Fund Trust to implement the CGTMSE for both existing and new enterprises. The eligible enterprises can thus avail a loan from authorized commercial banks (public/ private/foreign) and regional banks with the assurance provided by the trust to the lenders for providing loan amounts up to ₹ 2 Cr.

Features of CGTMSE Scheme

Here are some features and benefits of CGTMSE Scheme:

  • Nature of Loan : Micro, small and medium enterprises (MSMEs) can get both term loan and working capital facilities under the CGTMSE scheme without any collateral or third-party guarantees. 
  • Guarantee Cover : The guarantee cover provided by CGTMSE is upto 85% of the credit facilities availed by the enterprise and varies based on the following factors:
  • Category
    credit Facility
    Up to ₹ 5 Lakh ₹ 5 Lakh to ₹ 50 Lakh ₹ 5 Cr to ₹ 1 Cr
    Micro Enterprises CGTMSE covers 85% of the default amount with a maximum of ₹ 4.25 Lakh In this case, 75% of the default amount with a maximum of Rs. CGTMSE covers ₹ 37.50 Lakh. The guarantee remains the same under this; however, assurance cover is provided with the maximum ₹ 1.50 Cr.
    Women and Units in NER (North-East Region) CGTMSE provides a guarantee cover of 80 percent of the default amount for credit facility up to ₹ 50 Lakh availed by women enterprises and enterprises units in the North East Region.
    Others For any other enterprise, CGTMSE provides guarantee cover upto 75 percent of the default amount, with maximum ₹ 40 Lakh for credit facility up to Rs. 50 lakhs.

  • Tenure of Guarantee: The Guarantee cover provided by CGTMSE under the scheme provided for the tenure of the term loan/composite credit. However, in the case of working capital, the guarantee cover is provided for 5 years or in blocks of 5 years.
  • Accessible credit facilities : One of the most significant advantages of CGTMSE scheme is that enterprises can even avail a credit when they don’t have much viable experience in the market without any collateral.
  • Repayment of Credit : In case of default of the loan, the entire loan amount including the interest charged on loan for 3 months or the whole of the outstanding amount of the loan including the accrued interest from the suit filed date or when the loan turns into an NPA, whichever is lower is considered for the CGTMSE loan recovery process.
  • Rehabilition : If the business units are beyond control to revitalize they are also provided rehabilitation support upto ₹ 1 Cr as support for the revival of business.

How to Apply for CGTMSE Loan?

SMEs or MSMEs can apply for CGTMSE loan from the authorized 133 lending Institutions registered as MLIs of the Trust, including a; the major rural, urban, public sector banks, and private sector banks of India.
To apply for CGTMSE Loan, enterprises need to follow the below-mentioned procedure:

  • Formation of the Business Entity : If the applicant applying for the loan does not have an existing enterprise, he has to incorporate a private limited company/ limited liability partnership/ one-person company, etc. and complete the formalities of setting up the business including getting business registration, obtaining necessary approvals, tax registrations etc.
  • Business Plan : Once, the business is set up, the applicant needs to conduct thorough research about the market and prepare a detailed business plan about the business model, projected goals, revenue etc. In case of the existing enterprise, all relevant information about the business including the purpose of loan estimated revenue, revenue earned in the past etc. must be presented to the lending institution authorized under the CGTMSE scheme. However, ensure the report is prepared by experienced professionals to avoid any chances of rejection. Subsequently, the loan application is also filled to the lender, which contains information about credit terms, working capital facilities etc.
  • Sanction for Bank Loan : As the request for loan application has been made, the lending institution analyzes the business model and application submitted by the applicant and finally sanction the loan if they meet the eligibility criteria.
  • Obtaining the Guarantee Cover : Finally, the lender applies for the guarantee cover from the CGTMSE authority. If the loan is approved by CGTMSE authority, it provides the guarantee cover to the bank/lender and the guarantee fee and service charges are paid by the borrower.

CGTMSE Fee & Charges

  • The borrower has to pay an annual Guarantee Fee of 1% p.a. of the credit facility availed:
    • 0.75% – for credit of up to ₹ 50 Lakh
    • 0.85% for credit above ₹ 50 Lakh but up to ₹ 10 Lakh
  • For women and Micro Enterprises and units in NER, CGTMSE fee is charged for credit up to ₹ 1 Cr.

Eligibility Criteria For CGTMSE Scheme

The eligibility criteria for lenders and borrowers under CGTMSE ( Credit Guarantee Fund Scheme for Micro and Small Enterprises) is mentioned below.

  • Lending Institutions : As on May 31, 2016, there were 133 eligible Lending Institutions registered as MLIs (Member Lending Institutions) of the Trust.
    • 26 Public Sector Banks
    • 21 Private Sector Banks
    • 73 Regional Rural Banks (RRBs)
    • 4 Foreign Banks.
    • Delhi Financial Corporation
    • Kerala Financial Corporation
    • Jammu & Kashmir Development Finance Corporation Ltd
    • Andhra Pradesh State Financial Corporation
    • Export-Import Bank of India
    • The Tamil Nadu Industrial Investment Corporation Ltd
    • National Small Industries Corporation (NSIC)
    • North Eastern Development Finance Corporation (NEDFI)
    • Small Industries Development Bank of India (SIDBI).
  • Borrowers : All the existing and new enterprises can apply for CGTMSE under the following circumstances:
    • A maximum of ₹ 4 Cr guarantee cover is provided for credit facility upto ₹ 5 Cr. In the case of micro-enterprises, the maximum limit for guarantee cover is upto Rs. 1.5 crores for credit amounts ranging from ₹ 50 Lakh to ₹ 2 Cr.
    • The following entities are not eligible to apply for the loan under CGTMSE scheme:
      • Retail Trade
      • Educational Institutions
      • Agriculture
      • Self Help Groups (SHG)
      • Training Institutes

FAQs

How is CGTMSE fee calculated?

The borrower has to pay an annual Guarantee Fee of 1% p.a. of the credit facility availed, of which 0.75% is paid for credit of up to ₹ 5 Lakh and 0.85% for loan above ₹ 5 Lakh but up to ₹ 1 Cr In case of women and Micro Enterprises and units in NER, CGTMSE fee is charged for credit up to ₹ 1 Cr.

How can I get a CGTMSE loan?

To apply for a CGTMSE loan, you need to set up a business plan including business model, projected goal etc. and obtain necessary business documents if you have just registered your business. Once you have all the essential documents and business plans prepared by a professional, you can apply for the loan with the eligible lenders. They will analyze your business model and application. If the bank is satisfied, it will process the request to CGTMSE for getting a guarantee cover and sanction the loan amount after CGTMSE approves your application and you pay CGTMSE loan fees and charges.

What is the lock-in period in CGTMSE?

A lock-in period in CGTMSE is 18 months from either the date of the last disbursement of loan or when the guarantee cover came into force in respect of the particular credit facility, whichever is later is considered.

What is the risk premium CGTMSE?

To incentivize the borrowers, an annual guarantee fee is charged on the guaranteed amount for the first year and an outstanding amount of loan for the following manner as mentioned below:

Credit Facility MEs for women and NER (North East Region)
Up to ₹ 50 Lakh 1.00 + Risk Premium
Over ₹ 5 Lakh to ₹ 50 Lakh 1.35 + Risk Premium 1.50 + Risk Premium
Over ₹ 50 Lakh to ₹ 20 Lakh 1.80 + Risk Premium
Risk Premium on NPA – Guaranteed Risk Premium of CGTMSE claim
NPA Percent Risk Premium Claim Payout Risk Premium
0-5% SR 0-5% SR
>5-10% 10% of SR >5-10% 10% of SR
>10-15% 15% of SR >10-15% 15% of SR
>15-20% 20% of SR >15-20% 20% of SR
>>20% 25% of SR >20% 25% of SR
** SR stands for Standard Rate

Which bank provides CGTMSE?

There are 133 banks which are registered as MLIs (Member Lending Institutions) of the Trust, including private sector banks, public sector banks and rural banks that are eligible to provide loan CGTMSE.


*Terms and conditions apply. Credit at sole discretion of lender subject to credit appraisal, eligibility check, rates, charges and terms. Information displayed is indicative and from collected from public sources. Read More
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