CGTMSE 2026: The Updated Limits and Coverage Every Banker Must Know

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is the single most-tested MSME scheme in the IIBF MSME exam. After the 2025 revisions the limits widened, the fee structure changed, and the hybrid security model was tightened. Here is the entire current framework on one page.

What CGTMSE is, in one line

A credit guarantee — funded jointly by the Government of India and SIDBI — that lets Member Lending Institutions (MLIs) lend to MSEs without collateral or third-party guarantee. If the borrower defaults, CGTMSE pays up to 85% of the unpaid balance.

The numbers you must lock

• Maximum guarantee cover per borrower: ₹5 crore (revised 2023-25).
• Eligible enterprises: Micro and Small. Medium enterprises are NOT covered under CGTMSE (they have other schemes like CGS-II).
• Eligible facilities: Term loan, working capital, or both — including non-fund-based limits.
• Loan tenure cap: No tenure cap, but the guarantee runs for the agreed credit period.

Guarantee coverage slabs

Annual Guarantee Fee (AGF) — the revised slabs

The AGF is a percentage of the loan amount, payable annually. Revised structure:

Women-led enterprises in the North East Region get a 10% concession on AGF.

The Hybrid Security model — important for the exam

Banks may obtain collateral for part of the loan and avail CGTMSE cover for the rest. Conditions:

• Collateral can cover up to 100% of the secured portion but cannot exceed the loan amount.
• CGTMSE covers only the unsecured portion.
• The MLI cannot move collateral to itself first and then claim guarantee. The unsecured portion must remain genuinely uncollateralised.

Claim process — the three triggers

The MLI can lodge a claim when one of these happens:

1. Account turns NPA as per RBI guidelines.
2. Suit filed against the borrower (where the outstanding exceeds ₹10 lakh).
3. One-Time Settlement (OTS) is approved with CGTMSE's prior consent.

First instalment of claim: 75% of the guaranteed amount, within 30 days of lodgement. Balance 25% paid after legal action is concluded.

Exclusions — what CGTMSE will NOT cover

• Medium enterprises.
• Retail trade (with some exceptions under specific RBI notifications).
• Educational institutions, training, and self-help groups.
• Agriculture (covered by other schemes).
• Loans below ₹10,000 in account-aggregate.

How CGTMSE compares with other schemes

• CGS-II (Subordinated Debt): For stressed MSMEs needing equity-like support.
• CGSSD (Distressed Assets Fund): Personal loan to MSME promoters to infuse as quasi-equity.
• CGFMU (Mudra Cover): Guarantees Mudra loans up to ₹10 lakh.

Likely MCQ traps

1. "CGTMSE covers Medium enterprises" — false. Only Micro and Small.
2. "Coverage is always 75%" — false. Up to ₹5 lakh micro gets 85%.
3. "Claim first instalment is 100%" — false. 75% first, 25% after legal closure.
4. "Hybrid security means CGTMSE covers the secured part" — false. Only the unsecured part.
5. "Maximum cover is ₹2 crore" — outdated. Revised to ₹5 crore.

FAQ

Is CGTMSE applicable to NBFC loans? Yes, since 2018 select NBFCs are MLIs. Check the latest CGTMSE MLI list for the current names.

What is the maximum loan size eligible for CGTMSE cover? ₹5 crore in 2026. The 2023 revision moved it from ₹2 crore to ₹5 crore.

Can a borrower avail CGTMSE multiple times? Yes, but aggregate cover across facilities cannot exceed ₹5 crore for a single borrower account.

Next step: CGTMSE is high-yield for the MSME exam. Practice 30 MCQs on collateral-free lending schemes on our platform — the revised numbers are tested in every recent cycle.