Credit Guarantee Fund Trust for Micro and Small Enterprises
Also called: CGTMSE · Topic: Rural Credit, Microfinance and Financial Inclusion · NCERT: Beyond NCERT
Meaning
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a trust backed by the government. It was set up in 2000 by the Ministry of MSME and SIDBI. It gives a credit guarantee: a promise to repay the lender if the borrower does not. Because the trust carries most of the risk, banks can lend to micro and small enterprises without collateral, which is an asset such as land or a building that a borrower pledges as security for a loan. This helps small firms that have no property to pledge. Budget 2025-26 raised the largest loan it can guarantee from ₹5 crore to ₹10 crore. Women borrowers get 85% cover, against the normal 75%.
Example
A woman runs a small tailoring unit and borrows ₹10 lakh from a bank without pledging any asset. CGTMSE guarantees the loan. If she cannot repay any of it, the trust pays the bank up to 85% of the loss, about ₹8.5 lakh, so the bank loses only about ₹1.5 lakh.
Don't confuse with
- CGFMU (2015): a separate guarantee fund for MUDRA and other micro loans. CGTMSE covers micro and small enterprise loans in general.
- Self-Reliant India (SRI) Fund: it gives MSMEs equity (money in return for a share of ownership). CGTMSE does not lend or invest. It only guarantees loans that banks make.