The Ministry of Micro, Small and Medium Enterprises (MSME) implements the Credit Guarantee Scheme (CGS) for Micro and Small Enterprises (MSEs) through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). The scheme provides credit guarantees for credit facilities extended to MSEs, including first-generation entrepreneurs, women-led enterprises, and units located in backward districts, without requiring collateral security or third-party guarantees across the country.
Several significant enhancements have been made to improve credit flow and awareness. The guarantee ceiling for loans under CGS was increased from ₹5 crore to ₹10 crore effective April 1, 2025. The Annual Guarantee Fees (AGF) structure was revised with a 50% reduction in the standard rate, now as low as 0.37% per annum. Enhanced guarantee coverage has been provided for MSEs led by special categories including women-led enterprises.
According to Reserve Bank of India's Master Direction - Lending to Micro, Small & Medium Enterprises (MSME) Sector dated February 9, 2026, all Scheduled Commercial Banks are mandated not to accept collateral security for loans up to ₹20 lakh extended to MSE sector units.
Special provisions include a 10% discount on AGF and an additional 5% guarantee coverage for MSEs in Identified Credit Deficient Districts (ICDD) as per RBI. A special guarantee scheme called "Tamil Nadu Credit Guarantee Scheme (TNCGS)" is being implemented in collaboration with the Government of Tamil Nadu to provide enhanced guarantee coverage for credit facilities extended to MSEs engaged in the Manufacturing Sector situated in Tamil Nadu.
The performance of banks under the CGTMSE Scheme and overall credit flow to the MSME sector are reviewed periodically in State Level Bankers' Committee (SLBC) meetings. The Ministry of MSME, through its field offices, regularly organizes outreach programs in coordination with MSME/Industry Departments of States/UTs and other stakeholders including CGTMSE, SIDBI, SLBC, Banks, and MSME Associations to create awareness of the Scheme.
This information was provided by Union Minister of State for MSME, Sushri Shobha Karandlaje, in Lok Sabha as a written reply to a question on July 23, 2026.