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Context: The Union Ministry of Micro, Small, and Medium Enterprises (MSMEs) unveiled the revamped CGTMSE Scheme.


  • In the Union Budget 2023-24, CGTMSE Scheme was given an additional capital support of Rs 9,000 crores to revamp its Scheme to guarantee an additional 2 lakh crore to Micro and Small Enterprises.

Changes Introduced

  • The updates included a 50% cut in guaranteed costs for loans up to 1 crore, bringing the lowest guaranteed fee to 0.37% pa.
  • An increase in the maximum limit for a guarantee from Rs 2 crore to 5 crores.
  • An increase in the threshold level for claim settlement without the beginning of legal action to 10 lahks

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) Scheme

  • The Scheme was launched in 2000 by the Government of India and the Small Industries Development Bank of India (SIDBI) as a trust.
  • It aims to provide credit guarantees to financial institutions that offer collateral-free loans to micro and small enterprises (MSMEs) across India.
  • It covers credit facilities up to Rs. 5 crores.
  • It offers credit guarantees from 75% to 85% depending on the category of the borrower and the location of the enterprise.


  • The CGTMSE scheme covers both term loans and working capital loans for new and existing MSEs engaged in manufacturing or service activities.
  • The scheme also covers loans given under various government schemes such as Prime Minister's Employment Generation Programme (PMEGP), Stand Up India, Mudra Yojana, etc.

Working Model

  • The CGTMSE scheme operates through eligible lending institutions, such as banks, financial institutions, and non-banking financial companies (NBFCs), which agree with the CGTMSE.
  • The lending institutions sanction the credit facility to the eligible MSEs without any collateral security or third-party guarantee.
  • The CGTMSE then provides a partial credit guarantee to the lending institutions in case of default by the borrower.
  • The CGTMSE charges a one-time guarantee fee and an annual service fee from the lending institutions based on the credit facility sanctioned.


  • The CGTMSE scheme has several benefits for both the borrowers and the lenders.
  • For the borrowers, it provides access to formal credit without any collateral requirement, reduces the cost of borrowing, and enables them to expand their business activities.
  • For the lenders, it reduces their credit risk, increases their portfolio diversification, and improves their profitability.


  • The CGTMSE scheme has been instrumental in supporting the growth and development of the MSE sector in India. The scheme has also contributed to generating employment opportunities and enhancing social inclusion.

Must Read Articles:

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): https://www.iasgyan.in/daily-current-affairs/credit-guarantee-scheme-for-micro-small-enterprises

MSME Sector: https://www.iasgyan.in/daily-current-affairs/msme-sector-14


Q. Micro, Small and Medium enterprises (MSMEs) are vital for creating jobs, fostering innovation and contributing to social welfare. However, they often face challenges in accessing adequate and affordable credit from formal financial institutions. What are some of the barriers and opportunities for providing credit to MSMEs, and what are the best practices and policies to overcome them?