CGTMSE Loan for MSMEs: The Ultimate Guide Explaining What It Is, Features, Eligibility, & Procedure

For the selected Micro, Small, and Medium Enterprises, the government of India is providing special financial protection through the CGTMSE scheme. Usually, this is loan-based support given to the MSMEs that help the nation’s development and support the Indian economy.

The CGTMSE or Credit Guarantee Fund Scheme for Micro and Small Enterprises is a government-sponsored scheme helping novice and existing MSMEs. This scheme supports the enterprises in all aspects of finances and provides huge credit facilities.

If you’re looking for detailed information about CGTMSE loans, you’ll love this guide. Here, you’ll find:

  • What is a CGTMSE loan?
  • CGTMSE loan features, eligible enterprises, and bank details.
  • Complete application procedure and a lot more.

As you read the article, you’ll acknowledge the benefits and best features of this scheme. So, without any further delay, let’s dive in.

What is CGTMSE Loan?

CGTMSE, or Credit Guarantee Fund Scheme for Micro and Small Enterprises that the Ministry of Micro, Small & Medium Enterprises(MSME) introduced on August 30, 2000. It was started to facilitate small to medium businesses financially without the interference of third-party communities or industries.

In this scheme, the small to medium enterprises can avail of credits at low-interest rates for existing and new enterprises. This trust provides credit up to ₹ 2 Cr. Hence, the lenders can opt for a loan from the authorized private, public, foreign, or regional banks with the assurance provided by the trust.

The Schemes under the CGTMSE loans are:

1. CGS-I for Bank/FIs

This scheme is usually known as the CGFSI or Credit Guarantee Fund Scheme for Small Industries and significantly extended to the MSE borrowers by the lenders.

Key Highlights of the CGFSI Scheme:

The scheme covers fund and non-fund-based credit facilities provided by the Member Lending Institutions (MLIs) supporting MSE borrowers. These credit facilities are working capital loans or term loans with the below-given limitations.

  • The Regional Rural banks and some financial institutions should not credit above Rs.50 lakh.
  • The Schedules Commercial Banks, NBFCs, and selected financial institutions shouldn’t credit above Rs.200 lakh.
  • Similarly, small finance banks shouldn’t credit over Rs.50 lakh respectively.

*Note: CGTMSE launched a new Hybrid security product where the MLIs get the collateral security for a credit facility’s portion. However, the CGS-I covers the remaining unsecured part that could go up to Rs.200 lakh. Also, this CGTMSE has a Pari-Passu charge on the provided securities.

2. CGS-II for NBFCs

Unlike CGS-I, CGS-II is extended by the NBFCs to the MSE borrowers.

Key Highlights of the CGS-II Scheme:

  • The CGTMSE trust covers the extended loans by the lenders in the MSE sector that are less than Rs.200 lakh. At the same time, the credit facility for the MSE retail trade is up to Rs.100 lakh.
  • This credit facility is standard based on the RBI guidelines and shouldn’t be used for debt repayments.

CGTMSE Features

The CGTMSE loan scheme is applicable for Micro, Small, and Medium enterprises which provides both term loans and working capital facilities under the CGTMSE loan scheme without the interference of third-party guarantees. The best part of this scheme is that it guarantees up to 85% of credit facilities. Usually, the women entrepreneurs and North-East region businesses are given more importance to avail of this scheme.

  • Micro Enterprises: For a credit facility of Rs.5 lakh, the CGTMSE covers Rs.4.25 lakh, 85% of the default amount. While Rs.5 lakh to Rs.50 lakh credit facility, the scheme covers a maximum of Rs.37.50 lakh, i.e., 75% of the total credit facility. Similarly, for the credit facility of Rs.50 lakh to Rs.2 Cr, the scheme covers 75%, i.e., Rs.1.5 Cr.
  • Women & NER Units: The scheme covers 80% of the total credit of Rs.50 lakh for women and NER units.
  • Others: Finally, for the credit facility of Rs.50 lakh, the scheme covers 75% of total credit with a maximum of Rs.40 lakh.
  • MSE Retail Trade: For a credit facility of Rs.10 lakh to Rs.1 Cr, the scheme covers 50% of the total credit, i.e., and the maximum cover is up to Rs.50 lakhs.

Usually, the CGTMSE loan scheme covers the credit within the provided term loan or composite credit tenure. Yet, the guarantee cover provided for the working capital is either the blocks of 5 years or five years. The best feature of the scheme is it provides accessible credit facilities. Hence, the enterprises can avail of the credits when they don’t have enough experience in business without any collateral.

The CGTMSE loan scheme provides rehabilitation support for up to Rs.1 Cr and supports the business’s survival whenever necessary. The repayment procedure of the scheme covers including interest for three months. Or else, it covers the entire amount, including interest from the day when it turns to an NPA or the suit-filled date, considering whichever is lower.

Eligible Enterprises for the CGTMSE Loan

Here’s the complete list of enterprises eligible for this CGTMSE loan scheme:

  • News and existing MSMEs solely engaged in manufacturing and service activities. The scheme is available for the selected NBFCs. However, the retail trade, educational sector, self-help groups, and training institutions aren’t eligible for this scheme.

Banks Associated with CGTMSE

The eligible CGTMSE loan lenders are:

  • Schedules Commercial Banks in private, public, or foreign sectors.
  • The NABARD classifies the “Sustainable Viable” category banks.
  • And other 133 lending institutions that are registered as MLIs, including 26 Public Sector Banks, 21 Private Sector Banks, 73 Regional Rural Banks, 4 Foreign Banks, Delhi Financial Corporation, SIDBI, Nedfi, Tamil Nadu Industrial Investment Corporation Ltd, and Kerala Financial Corporation.

How to Apply for CGTMSE Loan?

Under this scheme, the borrower gets credit up to Rs.2 Cr. There are specific regulations for both borrowers and lenders that need to be strictly followed.

As discussed earlier, the CGTMSE loan should be provided by the registered banks and financial institutions. However, the retail trade, agriculture, self-help groups, educational institutions, and training institutions don’t become eligible to apply for the CGTMSE loan.

Here’s more information on the loan charges and required documents.

Fee & Other Charges

The enterprises or borrowers have to pay an annual guarantee fee of 1% of the total credit facility. However, for a credit of up to Rs.50 lakh and Rs.50 lakh to Rs.1 Cr, the annual guarantee fee is 0.75% and 0.85%, respectively. In comparison, the fee for women, units in NER, and micro-enterprises are charged for credit up to Rs.1 Cr. Source: CGTMSE Portal

Required Documents

Availability of the credit facility through the CGTMSE loan scheme involves a set of processes, as mentioned below.

  • Business entity establishment: Incorporate a business unit in the relevant category, including partnership, proprietorship, or any other ideal category. Verify complete certificates and tax registrations.
  • Business project report: Present the report on your business project through market analysis and keen study. Include business model, financials, promoter profile, or any other necessary fields.
  • Application form: Submit the reports and application form to the lenders. After the verification, you’ll get noticed by the department soon. Usually, once the reports are submitted, they are sanctioned based on the various lender’s policies.
  • After the loan sanction, the lender files a guarantee cover.

Meet the Experts for more Support

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