PMEGP vs CGTMSE vs MUDRA: Which Central Scheme Fits Your MSME?
PMEGP gives a subsidy but has been paused since 31 March 2026; CGTMSE removes the need for collateral and MUDRA is a loan, and both are open. How the three central schemes differ and what to use while PMEGP is paused.
In this article
PMEGP gives a subsidy, CGTMSE lets you borrow without collateral, and MUDRA is a loan — but only CGTMSE and MUDRA are open today: PMEGP applications have been paused since 31 March 2026 until the scheme's continuation is approved. A new micro business that needs money now usually starts with a MUDRA loan (up to ₹20 lakh) or a CGTMSE-covered bank loan (up to ₹10 crore), and keeps an eye on the PMEGP portal for the reopening.
Sources checked: 20 October 2026
Facts checked on 20 October 2026 against the PMEGP portal, the Ministry of MSME scheme booklet, the CGTMSE scheme document and circular, and the Department of Financial Services MUDRA page.
Key facts
| PMEGP | CGTMSE | MUDRA | |
|---|---|---|---|
| Status (20 Oct 2026) | Applications paused since 31 March 2026 | Open | Open |
| What it is | Margin-money subsidy on a bank loan | Credit guarantee — no collateral needed | Loan for micro enterprises |
| Maximum | Project cost ₹50 lakh (manufacturing) / ₹20 lakh (service) | Loans up to ₹10 crore | Loans up to ₹20 lakh |
| New or existing units | New units only | Both | Both |
| How you apply | PMEGP portal (when it reopens) | Through your bank — no separate application | At a bank, NBFC or MFI, or on Udyamimitra |
Is PMEGP open in 2026?
No: PMEGP applications have been paused since 31 March 2026. The scheme was approved for 2021-22 to 2025-26, and on 18 October 2026 the PMEGP portal said fresh applications will be enabled once its continuation, with revised guidelines, is approved. Do not prepare a PMEGP application until the portal reopens.
For reference, the terms of the 2021-26 scheme were:
- Margin money subsidy: 15% (urban) and 25% (rural) for general-category applicants; 25% and 35% for special categories — SC, ST, OBC, minorities, women, ex-servicemen, transgender persons, persons with disabilities, and applicants in the North East, hill and border areas or aspirational districts.
- Own contribution: 10% of project cost (5% for special categories); the bank lends the rest. The margin money sat as a term deposit for three years and was adjusted once the unit was verified as working.
- Conditions: new units only, one per family, an Entrepreneurship Development Programme, and at least Class VIII pass for projects above ₹10 lakh (manufacturing) or ₹5 lakh (services).
- Second loan: successful units could borrow up to ₹1 crore (manufacturing) or ₹25 lakh (service) for upgradation with a 15% subsidy (20% in the North East and hill States).
A continuation may change these terms. See the PMEGP scheme page for the current notice.
What is the difference between PMEGP, CGTMSE and MUDRA?
PMEGP pays part of a new unit's project cost, CGTMSE replaces the collateral a bank would ask for, and MUDRA is the loan itself for very small businesses.
CGTMSE guarantees your loan to the lender, so it can lend without collateral or a third-party guarantee:
- Cover on loans up to ₹10 crore per borrower from scheduled commercial banks (raised from ₹5 crore for guarantees approved on or after 1 April 2025); lower limits apply to small finance, regional rural and co-operative banks and micro-finance institutions.
- An annual guarantee fee from 0.37% for loans up to ₹10 lakh to 1.20% at the top of the range, which the lender may pass on. Punjab's 2026 policy repays it up to ₹3 lakh a year for seven years.
- No separate application — ask your bank when it sanctions the loan. More in our CGTMSE guide.
MUDRA loans come in four bands, for non-farm income-generating activity including dairy, poultry and bee-keeping:
- Shishu: up to ₹50,000
- Kishor: ₹50,000 – ₹5 lakh
- Tarun: ₹5 lakh – ₹10 lakh
- Tarun Plus: ₹10 lakh – ₹20 lakh, for borrowers who have taken and repaid a Tarun loan
MUDRA loans need no collateral either; they are covered by a separate fund, the Credit Guarantee Fund for Micro Units.
Which one should I choose?
- Need a small loan quickly for a micro business? A MUDRA loan is usually the simplest route.
- Need a bigger loan and have no property to pledge? Ask your bank for CGTMSE cover.
- Starting a new unit and want a subsidy? PMEGP is paused; check the eligibility checker for open State schemes, which often pay capital or interest subsidies to new units.
The schemes are not either/or: a MUDRA borrower who outgrows ₹20 lakh moves naturally to a CGTMSE-backed loan, and when PMEGP reopens a PMEGP loan can be covered by a credit guarantee.
What about PMEGP vs PMFME for food units?
Neither is taking new applications. PMFME, the 35% credit-linked subsidy for micro food-processing units, ran until 30 September 2026 and is awaiting an extension. A food unit in Haryana can look at the Haryana Agri-Business and Food Processing Policy 2026 meanwhile; see our PMFME status guide.
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Schemes in this article
Eligibility, rates, documents and current status for each, on its scheme page.
- Prime Minister Employment Generation ProgrammeApplications paused (31 March 2026)
- Credit Guarantee Fund Trust for Micro and Small EnterprisesGuarantee cover on loans up to ₹10 Crore
- Pradhan Mantri Mudra YojanaUp to ₹20 Lakh (Tarun Plus)
- PM Formalisation of Micro Food EnterprisesAwaiting extension (30 September 2026)
- Haryana Agri-Business & Food Processing Policy 202625–45% of eligible capital expenditure, up to ₹2–6 Crore by scheme and area
Frequently asked questions
Is PMEGP open in 2026?
No. PMEGP applications have been paused since 31 March 2026. On 18 October 2026 the PMEGP portal said fresh application submission is unavailable and will be enabled once the scheme's continuation, with revised guidelines, is approved.
What is the difference between PMEGP, CGTMSE and MUDRA?
PMEGP is a margin-money subsidy of 15% to 35% on a bank loan for a new micro unit. CGTMSE is a guarantee that lets a micro or small enterprise borrow up to ₹10 crore without collateral. MUDRA is a loan of up to ₹20 lakh for a non-farm micro enterprise. CGTMSE and MUDRA are open; PMEGP is paused.
Can an existing business get PMEGP?
No. PMEGP is for new units only, one per family, and units that have already received a government subsidy are not eligible — except for the second loan for upgrading a successful PMEGP unit.
Is there a separate application for CGTMSE?
No. You ask your bank to cover the loan under CGTMSE when it sanctions it. The bank registers the guarantee on the CGTMSE portal and pays the annual guarantee fee, which it may pass on to you.
What is MUDRA Tarun Plus?
A fourth MUDRA band, for loans between ₹10 lakh and ₹20 lakh, effective from 24 October 2024, for borrowers who have taken and repaid a Tarun loan.
Is PMFME an alternative to PMEGP for food units?
Not at present. PMFME, which gave a 35% credit-linked subsidy to micro food-processing units, ran until 30 September 2026 and is awaiting an extension. Haryana food units can look at the State's Agri-Business and Food Processing Policy 2026.
Sources
- PMEGP portal, Ministry of MSME — status of fresh applications
- Ministry of MSME — scheme booklet (February 2025), PMEGP section
- CGTMSE Circular No. 250/2024-25 (Ref. CGTMSE/273), 18 March 2025 — cover raised to ₹10 crore
- CGTMSE — CGS-I scheme document, updated 1 April 2026
- Department of Financial Services — Pradhan Mantri MUDRA Yojana (including Tarun Plus)
This article is general information for Indian MSMEs, not advice on your specific case. Scheme terms, tax rates and due dates change; the sources above were checked when the article was written or last updated. Speak to a professional before acting on it.
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