CGTMSE Scheme: Maximum Coverage Raised to Rs. 500 Lakhs

The Indian economy is supported by micro and small businesses (MSEs). However, because they frequently lack collateral or credit history, small companies frequently struggle to get loans from conventional financial institutions. (CGTMSE) the scheme was created by the Indian government to address this issue.

(SIDBI) and (MSMEs) introduced the CGTMSE program in August 2000. By ensuring a percentage of the loan amount, the initiative aims to give micro and small businesses access to credit without the need for collateral.

A lender (bank or finance institution) gives loans to MSEs within the CGTMSE scheme without requiring any kind of security. Any micro or small enterprise engaged in manufacturing, trading or service activities can avail of the benefits of the CGTMSE scheme. The scheme covers both new and existing enterprises, including those in the retail trade, agriculture, and allied activities.

According to a notification issued by the Indian government on March 31, 2023, there have been substantial changes made to the (CGTMSE) program. The CGS-I scheme’s coverage ceiling has been raised from Rs. 200 lakhs to Rs. 500 lakhs as a result of the notification with reference number CGTMSE/44/293 and circular number 220/2022-23.

The CGS-I scheme provides

credit guarantees for micro and small enterprises (MSEs) for the credit facilities extended by eligible Member Lending Institutions (MLIs). The coverage under the CGS-I scheme has been increased from Rs. 200 lakhs to Rs. 500 lakhs per borrower

The revised modifications will be applicable for all guarantees approved on or after April 01, 2023, including enhancement in the working capital of existing covered accounts. All other terms and conditions of the scheme shall remain unchanged.

The increase in the ceiling of coverage under the CGS-I scheme is a significant development that will benefit micro and small enterprises. It will enable these enterprises to access higher credit facilities without any collateral, thereby promoting entrepreneurship and creating employment opportunities. The CGTMSE scheme has been instrumental in supporting the growth of MSEs in India, and this modification will further strengthen its impact on the economy.

To be eligible for the CGTMSE scheme,

the enterprise should have a good track record and creditworthiness. It should also have a viable project report, which is evaluated by the lending institution. The scheme is not available to enterprises engaged in speculative or illegal activities.

The premium for the guarantee covered under the CGTMSE scheme is borne by the borrower, and it varies according to the amount of the loan and the tenure of the loan. The premium rates are lower for women entrepreneurs and for enterprises located in the North-Eastern Region and the hilly states.

In conclusion, the CGTMSE scheme is a significant initiative by the Government of India to support the growth of SMEs in the country. By providing collateral-free credit and guarantee cover, the scheme has made it easier for SMEs to obtain loans from banks and financial institutions. The scheme has contributed significantly to the development of the SME sector and has played a vital role in promoting economic growth and employment generation in the country.

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Frequently Asked Questions (FAQs)

1. What is the CGTMSE scheme?

The CGTMSE scheme is a government-backed credit guarantee initiative that enables micro and small enterprises to obtain business loans without pledging collateral. It works by providing risk cover to banks and financial institutions, encouraging them to lend to eligible MSMEs.

2. What are the main benefits of the CGTMSE scheme?

The key advantages include collateral-free financing, improved access to institutional credit, support for first-time entrepreneurs, and easier funding for business expansion. This initiative significantly reduces financial barriers for small businesses.

3. Who is eligible under the CGTMSE scheme?

Eligibility is limited to micro and small enterprises involved in manufacturing or services. New ventures, startups, and existing MSMEs registered under the MSME framework can qualify, subject to lender assessment and compliance norms.

4. Which types of enterprises can avail this credit guarantee facility?

Manufacturing units, service providers, traders, startups, and self-employed professionals operating as micro or small enterprises can benefit from this credit guarantee support.

5. What is the maximum loan limit under the CGTMSE scheme?

The maximum amount that can be covered under this credit guarantee program is ₹2 crore per borrower, subject to lender approval and scheme guidelines.

6. Is collateral mandatory for loans covered under CGTMSE?

No collateral or third-party guarantee is required. This is one of the most significant features of this government-supported lending framework.

7. What loan facilities are covered under this scheme?

Both term loans and working capital facilities are eligible. Composite loans combining long-term and short-term funding can also be extended under this framework.

8. How does this scheme support new entrepreneurs?

By removing the need for security, the scheme enables first-time business owners to access formal credit based on project viability rather than asset ownership.

9. How to apply for CGTMSE scheme?

Applicants must approach a bank or financial institution that is a member of the CGTMSE trust. The lender processes the loan application and applies for guarantee coverage on behalf of the borrower after sanction.

10. Can startups apply under this credit guarantee program?

Yes, startups classified as micro or small enterprises and meeting the lender’s eligibility criteria can apply for funding supported by this guarantee mechanism.

11. How much guarantee coverage is provided?

The trust generally offers coverage of 75% to 85% of the sanctioned loan amount, depending on borrower category and loan size.

12. Are service-sector businesses included?

Yes, service-based enterprises such as IT services, logistics, healthcare, education, and consultancy firms are eligible if they qualify as micro or small enterprises.

13. Are there any charges associated with the scheme?

Borrowers are required to pay a one-time guarantee fee and an annual service fee. These charges vary based on loan amount and borrower profile.

14. Can existing business loans be brought under this scheme?

In certain cases, existing eligible credit facilities may be covered, provided the lending institution follows prescribed guidelines.

15. Why is this credit guarantee initiative important for MSMEs?

It strengthens financial inclusion, boosts entrepreneurship, and helps small businesses grow without the burden of asset-backed borrowing.