Credit Guarantee Fund Scheme for Micro & Small Enterprises (CGS-I / CGTMSE)

The Board of Trustees of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) framed this scheme to guarantee credit facilities extended by Lending Institutions to borrowers in the Micro & Small Enterprises (MSE) sector. Following the MSMED Act, 2006 the Trust and scheme were renamed to their present titles (earlier the Credit Guarantee Fund Scheme for Small Industries, CGFSI).

Subject to the scheme's provisions, the Trust undertakes to guarantee credit facilities extended to an eligible borrower by an eligible institution that has entered into the necessary agreement with the Trust. The Trust reserves the discretion to accept or reject any proposal that otherwise satisfies the scheme norms.

Eligible Activities

• •Trading (Retail / Wholesale) is an eligible activity for all MLIs including RRBs, aligned with other activities on extent of coverage, ceiling and guarantee fee.
• •Educational / Training Institutions are eligible, attracting fee, extent of coverage and other terms as under the normal scheme.
• •Manufacturing, production and services enterprises within the MSMED Act definition of Micro & Small Enterprises.

Tenure of Guarantee Cover

• •Term / composite credit: cover commences from the guarantee start date and runs through the agreed tenure of the term credit.
• •Working capital alone: cover is for 5 years or a block of 5 years; renewable after the initial 5-year block, with no maximum coverage period cap.

Hybrid / Partial Collateral Security Model

MLIs may obtain collateral security for part of a credit facility while covering the remaining unsecured portion (up to the overall ₹10 crore exposure) under CGS-I. CGTMSE holds a notional second charge on the collateral; there is no requirement for MLIs to create a charge in CGTMSE's favour by legal documentation.

Maximum Credit Facility Eligible (By MLI Type)

The ₹10 crore cap is the maximum guarantee coverage per borrower (irrespective of activity, including Trading), based on outstanding credit facilities. Borrowers may avail incremental cover to the extent of reduction in outstanding exposure, subject to the ₹10 crore cap. Facilities extended by more than one bank/FI jointly and/or separately are covered up to ₹10 crore per borrower, subject to each MLI's ceiling.

Conditions as on the Material Date

• •Credit facility is standard and regular (not SMA) as per RBI guidelines; and/or
• •The borrower's business or activity has not ceased; and/or
• •The facility has not been used to adjust any debt deemed bad or doubtful of recovery without the Trust's prior consent.
• •An MLI may apply for cover anytime during the loan tenure, provided the facility was not restructured / did not remain in SMA-2 in the last 1 year before application.

Facilities NOT Eligible

• •Facilities whose risks are additionally covered by DICGC / RBI, Government, or any insurer / guarantor — to the extent so covered.
• •Facilities already guaranteed through NCGTC Ltd.
• •Facilities inconsistent with any law or with directions of the Central Government or RBI in force.
• •Facilities to a borrower who has invoked a prior guarantee under this or listed schemes but not repaid the Trust.
• •Facilities sanctioned against collateral security and/or third-party guarantee (except the unsecured portion under the Hybrid model, up to ₹10 crore).
• •Facilities sanctioned without obtaining / creating any primary security, unless specifically provided for.

AGF is charged on the guaranteed amount for the first year and on the outstanding amount for the remaining tenure. Rates below are % p.a. and are inclusive of applicable GST. Depending on portfolio risk, a better-rated MLI gets a 10% discount on the Standard Rate, while a higher-risk MLI is charged a risk premium up to 70% of the Standard Rate.

RP = Risk Premium on Standard Rate. The Standard Rate is uniform across all activity, including Trading. The total exposure of the MSE determines the applicable slab. An MLI's applicable premium / discount is notified individually (CGTMSE Login » Reports and MIS » Risk Premium Reports).

Additional Category Concessions

Payment Timeline

• •First-time fee: paid within 30 days of first disbursement (not applicable to WC) or 30 days from the Demand Advice (CGDAN), whichever is later.
• •Subsequent AGF: generated by the 2nd week of February; payable on or before 30 March each year (pro-rata for first & last year, full for intervening years).
• •Outstanding for term loans is updated as on 31 December; the online update module is open 1–15 January each year.
• •On non-payment within the stipulated time, the Trust's liability to guarantee that facility lapses; a closed account may be revived within the next financial year if standard, with penal interest and additional risk premium.

The percentages below are the maximum extent of guarantee coverage of the amount in default, by category (including Trading activity) and by size of credit facility.

For renewal / enhancement of existing Working Capital accounts engaged in Trading already covered under the scheme, the revised extent of coverage and fee apply. Guarantees approved before 01 April 2025 continue on the legacy terms summarised in Section 8.

NPA Marking & Invocation Window

• •MLIs must report the NPA classification date by the end of the subsequent quarter (Guarantee Maintenance » Periodic Information » NPA Details).
• •The guarantee may be invoked within a maximum of 3 years from the NPA date or the lock-in period, whichever is later (for NPA dates on or after 15/03/2018).

Lock-in Period

The guarantee must have been in force at the time the account turned NPA, and the lock-in of 18 months (or 9 months for guarantees up to ₹10 lakh with tenure up to 36 months, w.e.f. 15 Dec 2023) from the date of last disbursement or the guarantee start date — whichever is later — must have lapsed. The facility must have been recalled and recovery proceedings initiated under due process of law.

Waiver of Legal Action (By Claim-Lodgement Date)

Settlement

• •The Trust pays 75% of the guaranteed amount within 30 days of an eligible, complete claim; interest at the Bank Rate applies for delay beyond 30 days.
• •The balance 25% can be lodged after 3 years from settlement of the first claim, or after receipt of the full & final OTS amount, whichever is earlier.
• •Where legal waiver applies, MLIs may opt for single-instalment settlement with coverage reduced by 15% (e.g. 75%→60%, 80%→65%).
• •Claims are settled to the extent of 2 times the fee (incl. recovery) remitted in the previous FY; excess is suspended until the payout is within cap.

• •Evaluate applications with prudent banking judgement; select commercially viable proposals; monitor borrower accounts closely.
• •Safeguard primary securities in good and enforceable condition.
• •Lodge guarantee claims in the prescribed form, manner and time; avoid delay in notifying default.
• •Continue full recourse and recovery action against the borrower even after the Trust pays a claim.
• •Refrain from any act — before or after invocation — that adversely affects the Trust's interest as guarantor; intimate the Trust before any compromise, waiver of personal guarantee, or creation of charge on secured assets.

Subrogation & Recovery Remittance

• •The MLI holds a lien on assets created out of the facility on its own behalf and on behalf of the Trust; the Trust does not exercise subrogation rights — recovery responsibility rests with the MLI.
• •Recoveries due to the Trust are remitted on a pro-rata basis; where legal action was taken, only court & advocate fees are netted off before pro-rata remittance.
• •MLIs must furnish a Statutory Auditors' Certificate on recoveries remitted post-settlement, consolidated at Head Office and signed by an official not below General Manager, submitted by 30 September of the succeeding FY.

Registration Criteria (Annexure I — Summary)

Legacy Coverage (Guarantees Approved Before 01 April 2025 — Annexure VI)

Guarantees approved before 01 April 2025 continue on the coverage terms in force at the time of approval. Successive circulars progressively revised the special-category rates and the upper ceiling (e.g. ₹200 lakh → ₹500 lakh → ₹10 crore). Key reference points: