What Are the Benefits of the CGTMSE Scheme

Vision without action is a daydream,” says a Japanese proverb.

India is a country with a lot of creative minds ready to take action. However, to establish, run and expand a business, money is key. Without money, daydreaming is the only available choice. This is especially true for the MSE sector in our country, which though creates employment for millions and significantly boosts the economy, often finds it hard to avail financing. Availing collateral-free business loans is extremely hard.

The government of India has thus tied up with SIDBI and set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).  The main aim of this scheme is to facilitate the flow of credit to the SME sector and to strengthen the credit delivery system.

The following are the key benefits of the CGTMSE scheme:


The business environment is dynamic with a high risk of failure. The probability of such failure often restricts people from venturing into business and implementing their idea. However, under the CGTMSE scheme, the MSE sector is now financially shielded of such risk.

The credit guarantee of the CGTMSE scheme offers security to entrepreneurs in case their business fails. Under the scheme, a maximum cover equivalent to 85 percent of the loan is available.  

If the borrower is unable to repay the loan, the loss will be covered by the scheme and the trust will pay the lending institutions the financial loss incurred by them.  The amount of cover depends upon the amount of loan, the borrower and the purpose of the loan.

Easy eligibility criteria

It’s not the easiest thing for MSEs to avail loans in the traditional manner. They often don’t fall within the eligibility criteria. However, the eligibility criterion for the CGTMSE is basic and intentionally so.

Almost everyone can meet the eligibility criteria set by the government and easily avail a loan. The two most important criteria are:

  • Having a viable and concrete business plan in place
  • Registering the business as per existing rules

Both new and existing borrowers can avail a loan under this scheme.

No experience required

The paradox of the business world is that most people will only trust you if you have some experience but to have such experience you first need people – financial institutions, clients, and suppliers – to trust you.

One of the major benefits of the CGTMSE is that one can acquire the loan under the scheme even if they have little or no experience in establishing or running a business.


There are 131 financial institutions that are associated with the CGTMSE scheme. They are called the Member Lending Institutions (MILs) and include all the major urban, rural, public sector and private sector banks.

Such an extended list makes it easy for MSEs to access the benefits of this government initiative and avail a loan under the scheme.

By covering both the risk of the lending institution and the entrepreneur with the credit guarantee, the government has paved the way for millions of SME entrepreneurs out there to bridge the gap between their business idea and its implementation.

Bajaj Finserv offers collateral free business loans of up to Rs. 30 lakh requiring minimal documentation. The application process is easy, and the disbursal is quick. Pre-approved loans further make the process of availing a business loan easier and more convenient.

Leave a Reply