Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
Last updated: 2026-11-13 · MockMentor
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was set up on 30 August 2000 by the Government of India and SIDBI. It guarantees loans that banks and other lenders give to micro and small enterprises without collateral, so lenders judge a project on its viability rather than its security.
In one line: if a guaranteed MSE loan goes bad, the trust pays the lender most of the loss, which lets banks lend without asking for collateral.
At a glance
| Item | Details |
|---|---|
| Set up | 30 August 2000 |
| By | Government of India and SIDBI |
| Maximum loan | ₹10 crore |
| Borrowers | New and existing micro and small enterprises, including trading and educational institutions |
| Not covered | Agriculture and self-help groups |
| Lenders | Scheduled commercial banks, selected RRBs, small finance banks, cooperative banks, NBFCs, MFIs |
Guarantee cover
| Borrower | Cover (most loans) |
|---|---|
| Micro enterprises, loans up to ₹5 lakh | 85% |
| Women entrepreneurs, units promoted by Agniveers | 90% |
| SC/ST, persons with disabilities, aspirational districts, ZED-certified units | 85% |
| Others | 75% |
Units in identified credit-deficient districts get 5% extra cover (from 15 December 2023).
Other features
- Hybrid security: part of a loan can be backed by collateral and the rest by CGTMSE.
- Claims are paid 75% first, once the account is an NPA and legal action has begun, and 25% after recovery proceedings.
Possible exam questions
- How do credit guarantees change banks' lending behaviour? Are there risks of moral hazard?
- Why does collateral remain a major barrier for small enterprises?
Complete notes in our courses: this page gives the essentials. The Super-Elite and Elite courses carry the full chapter with every update merged in, plus practice MCQs. Compare the courses.
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