The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has recently announced a significant enhancement to its Credit Guarantee Scheme – I (CGS-I) for banks. This update is expected to provide substantial support to businesses by increasing the ceiling of guarantee coverage from ₹5 crore to ₹10 crore. This change, in line with the Budget Speech for FY 2025-26, will benefit Public Sector Banks, Private Banks, Foreign Banks, and select Financial Institutions.
Understanding the New Changes
Previously, the coverage under CGS-I was capped at ₹5 crore. However, as per Circular No. 250/2024-25, issued on March 18, 2025, CGTMSE has decided to raise this limit to ₹10 crore. This decision follows an earlier enhancement in 2023, where the coverage was increased from ₹200 lakh to ₹500 lakh.
This increase will allow businesses to avail larger credit guarantees, enabling them to access more significant financial support without the need for collateral. It is a step towards financial inclusion and growth for enterprises that need capital to expand their operations.
New Annual Guarantee Fee (AGF) Rates
With the enhancement in the guarantee ceiling, the standard Annual Guarantee Fee (AGF) rates have been revised as follows:
| Slab (₹) | Standard Rate % (AGF) |
|---|---|
| Above 5 crore – 8 crore | 1.10% |
| Above 8 crore – 10 crore | 1.20% |
These rates indicate a moderate increase in AGF, ensuring that businesses can benefit from the extended guarantee coverage at a reasonable cost.
Who Will Benefit?
This change will have a positive impact on MSMEs and larger enterprises seeking unsecured credit. The key beneficiaries include:
- Small and Medium Businesses looking to expand their operations.
- Startups requiring substantial working capital.
- Exporters and manufacturers planning large-scale projects.
- Service providers in need of financial backing without collateral requirements.
Implementation Timeline
The revised guidelines will be applicable for all guarantees approved on or after April 1, 2025. This includes enhancements in working capital for existing covered accounts.
Key Takeaways
- Higher Credit Access: Businesses can now secure loans up to ₹10 crore under CGS-I.
- Encouraging Growth: More funding opportunities will enable companies to scale operations and generate employment.
- Government Support: This move aligns with the Indian government’s initiative to boost economic development and financial stability.
Final Thoughts
The increase in the credit guarantee ceiling under CGS-I is a major boost for businesses looking for financial support without traditional collateral. By expanding the coverage, CGTMSE is empowering enterprises and strengthening India’s economic backbone.
For more updates on credit guarantee schemes, financial assistance, and MSME policies, stay tuned!
Dipak Kushwah
Author
I am Dipak Kushwah, an experienced professional with over 8 years of expertise in Accounts and Tax Compliance. I am the proud Founder of Mannat Consultancy, where my team and I provide comprehensive services in Accounts, Taxation, and Finance. My journey in this field has been driven by a deep passion for helping businesses achieve financial success, and over the years, I have built strong relationships with my clients by offering tailored solutions that meet their unique needs.