What is CGTMSE Loan: A Comprehensive Guide

Posted on Monday, June 2nd, 2025 | By IndusInd Bank

Summary: The CGTMSE Loan Scheme enables MSMEs to access collateral-free credit of up to ₹10 crore through participating lenders. Launched by the Government of India in association with SIDBI, the scheme offers credit guarantees of 75% to 90%, encouraging financial institutions to lend to MSMEs. IndusInd Bank offers CGTMSE-backed loans with flexible tenures, multiple loan options, and a simple documentation process, empowering businesses to grow without security constraints.

Many entrepreneurs, particularly first-generation ones, face significant challenges in accessing formal credit due to a lack of sufficient collateral. Recognising the importance of financial support for small businesses, the Government of India introduced the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in association with SIDBI, to make collateral-free credit available to micro, small, and medium enterprises (MSMEs).

This scheme has played a key role in improving financial inclusion for small businesses and empowering them to grow.

What is the CGTMSE Loan Scheme?

Launched in 2000, the CGTMSE loan scheme provides credit guarantees to financial institutions offering loans to MSMEs. This makes it possible for small businesses to access collateral-free credit without the need to pledge personal or business assets. By offering credit guarantees to lenders, the scheme reduces their risks, thus encouraging them to extend loans to eligible businesses engaged in manufacturing or service activities. The scheme guarantees 75% to 90% of the sanctioned loan amount in case of default, offering a safety net to lenders.

This eliminates one of the key barriers for small businesses, i.e. arranging for physical collateral or third-party guarantees, thus enabling them to get access to formal credit and scale their operations.

By facilitating easier access to finance, the CGTMSE loan scheme has supported business growth and employment generation in the country. More importantly, it has strengthened what is often called the backbone of the Indian economy, i.e. its thriving network of micro and small enterprises.

Maximum Guarantee Coverage Under CGTMSE

Note: MSEs in RBI-identified Credit Deficient Districts (ICDD) receive an additional 5% coverage above the standard rate from December 15, 2023.  

Who is Eligible for CGTMSE Loans?

Eligible applicants include:

• New and existing Micro and Small Enterprises engaged in manufacturing or service activities
• All service sector activities as defined under the MSMED Act, 2006
• Excludes agriculture, Self Help Groups (SHGs), and Joint Liability Groups (JLGs)

Special coverage categories include women entrepreneurs, SC/ST individuals, persons with disabilities, and businesses in aspirational districts.

Documents Required to Apply for CGTMSE Loans

Wondering how to apply for CGTMSE loan? Lenders typically ask for the following documents as part of the application process:

• Duly filled CGTMSE loan application form with passport-sized photographs
• Business incorporation or company registration certificate
• CGTMSE loan coverage letter
• Application form or customer request letter
• MOA/AOA or partnership deed with Registrar of Firms proof (if collateral is in the partnership firm’s name)
• KYC and PAN details of the borrower and relevant parties
• GST registration certificate and latest GST returns

CGTMSE Backed Loans at IndusInd Bank

IndusInd Bank recognises the vital role that MSMEs play in driving economic development and employment in the country.

Key Features:

• Collateral-free loans up to INR 5 crores
• Loan Options Available: Term Loan, Working Capital Term/Demand Loan, Cash Credit (CC), and Overdraft (OD)
• Loan Purpose:  Working Capital and Capital Expenditure requirements
• Loan Tenure:
• Term Loan: Up to 7 years
• Working Capital Term Loan: Up to 5 years
• Cash Credit (CC) or Overdraft (OD) facility: 12 months (renewable)
• Annual Guarantee Fee (AGF): Payable as per CGTMSE Guidelines.

Choose IndusInd Bank for attractive CGTMSE loan interest ratesand a hassle-free online application process.

Visit the website today.

Disclaimer: The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.