The Ministry of Micro, Small and Medium Enterprises (MSME) has initiated the Credit Guarantee Scheme (CGS) for Micro Small Enterprises (MSEs). Union Minister of State for MSME, Shobha Karandlaje, disclosed this information during a session in Lok Sabha on July 23, 2026, responding to a question regarding the scheme.

According to the minister, the primary objective of the CGS is to enhance credit guarantees for MSEs, particularly targeting first-generation entrepreneurs, women-led businesses, and firms situated in economically backward regions of India. Significantly, these guarantees are available without the need for collateral or third-party backing.

As part of the government’s efforts to boost credit accessibility, several measures have been undertaken to increase awareness of the CGTMSE scheme among MSEs. Notably, the ceiling on credit guarantees has been raised from Rs. 5 crore to Rs. 10 crore, effective from April 1, 2025. Additionally, the Annual Guarantee Fees (AGF) structure has been reformed, leading to a substantial 50 per cent reduction in the standard rate, now set at 0.37 per cent per annum.

Enhanced Support for Special Categories of MSEs

Karandlaje elaborated on the enhancements made to the guarantee extent for MSEs belonging to special categories, including those led by women. Referencing the Reserve Bank of India’s guidelines from February 9, 2026, she noted that all Scheduled Commercial Banks are required to provide loans up to Rs. 20 lakh to MSE units without demanding collateral security.

To further promote credit flow in Identified Credit Deficient Districts (ICDD), the CGTMSE is offering a 10 per cent discount on the AGF. In addition, an extra 5 per cent guarantee coverage has been made available. This initiative aims to bolster financial support in regions that have historically struggled with lending.

Moreover, a specialised scheme known as the Tamil Nadu Credit Guarantee Scheme (TNCGS) has been developed in collaboration with the Tamil Nadu Government. This scheme’s primary aim is to augment guarantee coverage for credit facilities extended by Member Lending Institutions (MLIs) specifically to MSEs operating in the manufacturing sector within Tamil Nadu.

Regular Monitoring and Awareness Initiatives

Performance assessments of banks participating in the CGTMSE Scheme, along with the overall credit flow to the MSME sector, are conducted regularly during the State Level Bankers’ Committee (SLBC) meetings. Such reviews aim to ensure effective monitoring of financial services directed towards MSEs.

The Ministry of MSME also actively conducts outreach programmes through its field offices, working collaboratively with State/UT MSME/Industry Departments and other stakeholders. These initiatives involve partners such as CGTMSE, SIDBI, SLBC, banks, and MSME associations, all geared towards raising awareness about the Credit Guarantee Scheme.

Through these concerted efforts, the government aims to strengthen the support framework for MSMEs, ensuring they are equipped with the necessary financial resources to thrive in their endeavours and contribute to economic growth.

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