Credit Guarantee Scheme Enhanced for Micro and Small Enterprises

1
The Ministry of MSME is implementing the Credit Guarantee Scheme (CGS) to provide collateral-free credit to Micro and Small Enterprises.
2
The guarantee ceiling under the scheme was recently enhanced from Rs. 5 crore to Rs. 10 crore.
3
The Annual Guarantee Fees (AGF) structure was revised, reducing the standard rate by 50% to as low as 0.37% per annum.

●Scheme: Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
●Guarantee Ceiling: Increased from Rs. 5 crore to Rs. 10 crore (effective April 2025)
●Fee Reduction: Annual Guarantee Fees (AGF) reduced by 50% (as low as 0.37% p.a.)
●Collateral-Free Limit: RBI mandates all Scheduled Commercial Banks not to accept collateral for MSE loans up to Rs. 20 lakh
●Special Incentives: 10% discount on AGF and an additional 5% guarantee coverage in RBI-Identified Credit Deficient Districts (ICDD)
●State Collaboration: Implementation of the 'Tamil Nadu Credit Guarantee Scheme' in partnership with the TN Government

banking

General Awareness > Banking & Economy

upsc

GS Paper 3 > Indian Economy

CGTMSE

A trust set up by the Ministry of MSME and SIDBI to provide credit guarantees to financial institutions for loans given to MSEs without collateral.

•The RBI mandates that no collateral security should be accepted by scheduled commercial banks for MSE loans up to Rs. 20 lakh.
•The maximum guarantee ceiling under CGTMSE has been doubled to Rs. 10 crore.

•For banking exams, the specific numbers (Rs. 20 lakh collateral-free mandate, Rs. 10 crore ceiling) are high-yield.

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