CGTMSE Collateral-Free Loan 2026: How Much Is Covered, What the Fee Is and How to Apply

CGTMSE guarantees loans that banks give to micro and small enterprises without collateral or a third-party guarantee: up to ₹10 crore per borrower, covering 75% to 90% of the amount in default depending on who the borrower is and the size of the loan. The annual guarantee fee runs from 0.37% to 1.20% a year by loan size. You do not apply to CGTMSE yourself: you ask your bank for a collateral-free loan, the bank sanctions it, and the bank applies for the guarantee.

Sources checked: 29 October 2026

Facts checked on 29 October 2026 against the CGS-I scheme document (updated as on 1 April 2025), Circular No. 250/2024-25 and the home page on cgtmse.in, the MUDRA FAQs on mudra.org.in, and our scheme catalogue.

This is general information, not financial advice. The bank decides whether to lend and on what terms; CGTMSE only guarantees the loan.

Key facts

Point	What applies	Where it comes from
Who it is for	New or existing micro and small enterprises, including trading and educational or training institutions	CGS-I, paras 2(iv) and 4
Condition	Loan without collateral security or third-party guarantee (or the unsecured part, under hybrid security)	CGS-I, paras 2(iv) and 4
Maximum per borrower	₹10 crore through banks and select FIs; ₹200 lakh through SFBs, RRBs, State FIs and co-operative banks; ₹50 lakh through MFIs	CGS-I, para 4; Circular 250/2024-25
Extent of cover	75% to 90% of the amount in default, by borrower and loan size	CGS-I, para 9
Annual fee	0.37% (up to ₹10 lakh) to 1.20% (above ₹8 crore to ₹10 crore)	CGS-I, para 8
Who applies	The lender, after sanction	CGTMSE home page, steps 1 to 4

Our older guide, CGTMSE in 2026: how to get a collateral-free loan, explains what the scheme is for. This one is the reference for the numbers.

Who can get a CGTMSE-covered loan?

The scheme document defines an eligible borrower as a new or existing micro or small enterprise that has a credit facility from the lender "without any collateral security and/or third party guarantees". It covers term loans and working capital, fund-based and non-fund-based. Retail and wholesale trade is an eligible activity for all lenders, on the same terms as other activities, and so are educational and training institutions.

The lender can apply for cover at any time during the loan, provided the account has not been restructured and has not been in the SMA-2 category in the last year. A loan that is already a non-performing asset cannot be covered. Your MSME category matters: medium enterprises are outside CGS-I. Our catalogue lists Udyam registration first among the documents for the CGTMSE scheme page.

How much of the loan is covered?

For guarantees approved on or after 1 April 2025, paragraph 9 of the scheme document sets the maximum extent of cover, as a share of the amount in default:

Borrower	Extent of cover
Micro enterprises, loans up to ₹5 lakh	85%
Micro enterprises, loans above ₹5 lakh up to ₹50 lakh	75%
MSEs in the North East, the UT of Jammu and Kashmir and the UT of Ladakh	80%
Women entrepreneurs; MSEs promoted by Agniveers	90%
SC/ST entrepreneurs; persons with disability; MSEs in aspirational districts; ZED-certified MSEs; transgender entrepreneurs	85%
All other borrowers	75%

The document's table shows 75% in the column for loans above ₹50 lakh up to ₹10 crore and merges several cells, so ask your bank which band your loan falls in. Units in districts that RBI has identified as credit-deficient get 5 percentage points more (75% becomes 80%, 80% becomes 85%, 85% becomes 90%) since 15 December 2023. Proposals above ₹50 lakh must be rated internally by the lender and be of investment grade.

"Amount in default" is the principal and interest outstanding when the account turns NPA, or on the date of the claim if lower, up to the amount guaranteed. The lender can claim only after a lock-in period of 18 months (9 months for guarantees up to ₹10 lakh with a tenure up to 36 months).

How much does CGTMSE cost?

The annual guarantee fee (AGF) for guarantees approved or renewed on or after 1 April 2025 is charged on the guaranteed amount in the first year and on the outstanding amount for the rest of the tenure. The standard rates (paragraph 8; the top two rows from Circular 250/2024-25):

Loan amount	Standard rate a year
Up to ₹10 lakh	0.37%
Above ₹10 lakh to ₹50 lakh	0.55%
Above ₹50 lakh to ₹1 crore	0.60%
Above ₹1 crore to ₹2 crore	0.85%
Above ₹2 crore to ₹5 crore	1.00%
Above ₹5 crore to ₹8 crore	1.10%
Above ₹8 crore to ₹10 crore	1.20%

The same table shows a 10% discount and risk premiums of 15% to 70% on these rates, which depend on the lender's own portfolio rating, not on you. The fee is paid by the lender, and paragraph 8(iii) lets the lender recover it from the borrower. Once paid, it is not refundable except in the cases the document lists.

Some State policies repay the fee. Our catalogue records that Rajasthan's MSME Policy 2024 reimburses 100% of the CGTMSE fee for 7 years, and that Punjab's 2026 policy repays 100% of it, up to ₹3 lakh a year for seven years. Check the policy's own conditions before you count on it.

What is the hybrid security option?

If you can offer collateral for part of the loan, the hybrid (partial collateral) security product lets the lender take security for that part and cover the unsecured part, up to ₹10 crore, under CGS-I. CGTMSE takes a notional second charge on the collateral; the lender does not have to create a charge in its favour. This helps where a bank is willing to lend more than it would on an unsecured basis.

Separately, MUDRA's FAQs record that banks have been mandated not to insist on collateral for loans up to ₹20 lakh to micro and small units, following RBI's acceptance of a working group's recommendation. Our MUDRA loan guide covers the smallest loans.

How do I apply?

The CGTMSE home page sets out four steps:

1. Approach a member lending institution (a bank, NBFC or financial institution registered with CGTMSE) for a term loan or working capital. The list of members is on cgtmse.in.
2. The lender processes and sanctions the loan on its own credit appraisal.
3. The lender applies to CGTMSE for the guarantee after sanction or disbursement.
4. CGTMSE issues the cover to the lender once the fee is received.

What you control is step 1. Go to the bank with a project report the bank can appraise: cost of project, means of finance, projected cash flows and the repayment schedule. Ask in writing for the loan to be considered under CGTMSE without collateral, and ask which band of cover and fee applies. Our DPR builder drafts a bank-style report, and working capital loans and CMA data explains what banks check for limits.

Common mistakes

• Applying to CGTMSE directly. CGTMSE deals only with lenders.
• Ignoring the fee in the cash flow. It recurs every year on the outstanding amount, and the bank may pass it on.
• Assuming 100% cover. The cover is a share of the amount in default, and the bank still appraises the loan as its own risk.
• Being a medium enterprise. CGS-I is for micro and small enterprises only.

Getting help

Use the eligibility checker to see the schemes that fit your project, and our project finance service for the DPR, CMA data and loan papers. We do not arrange loans or act for any lender; the bank decides. To ask our expert team about your loan, book a consultation.