Objective

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was established to strengthen the credit delivery system and facilitate flow of credit to the MSE sector without the hassle of collateral security or third-party guarantees.

Mechanism

The Trust provides guarantee cover to Member Lending Institutions (MLIs) — Scheduled Commercial Banks, Regional Rural Banks, and select Financial Institutions — against credit facilities extended to eligible MSEs. The guarantee cover ranges from 50% to 85% of the credit facility depending on the category of borrower and loan amount.

Coverage

• Term loans and working capital facilities up to ₹5 crore per borrower.
• Enhanced guarantee cover of 85% for micro enterprises up to ₹5 lakh; 80% for women entrepreneurs, units in NER, Sikkim, Uttarakhand, Himachal Pradesh, J&K, Ladakh, Andaman & Nicobar, Lakshadweep, and Aspirational Districts; 75% for other micro enterprises above ₹5 lakh up to ₹5 crore; 50% for small enterprises above ₹5 crore up to ₹5 crore (effectively for small enterprises in the ₹2-5 crore bracket).

1. Entrepreneur approaches a Member Lending Institution (MLI) — bank or financial institution registered with CGTMSE — with a viable project proposal.
2. MLI appraises the project viability and creditworthiness as per its internal lending norms and RBI guidelines.
3. Upon sanction of the credit facility, the MLI applies for guarantee cover to CGTMSE through the online portal (https://cgtmse.in) within the stipulated timeline (typically 6 months from date of first disbursement).
4. MLI remits the applicable Guarantee Fee and Annual Service Fee to CGTMSE.
5. CGTMSE issues Guarantee Certificate upon realization of fees.
6. MLI disburses the loan to the entrepreneur; guarantee remains in force for the tenure of the credit facility subject to compliance with terms.