## Credit Guarantee Scheme (CGS) Policy Summary
This document summarizes the Indian government's Credit Guarantee Scheme (CGS) for Micro and Small Enterprises (MSEs), as articulated in response to Lok Sabha Unstarred Question No. 4698 on August 21, 2025. The CGS, implemented by the Ministry of Micro, Small and Medium Enterprises (MSME) through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), aims to provide credit guarantees to Member Lending Institutions (MLIs) for extending credit facilities to MSEs without collateral or third-party guarantees.
**Key Features of the CGS:**
* **Objective:** To facilitate access to credit for MSEs by providing guarantees to lending institutions.
* **Eligibility:** MSEs are eligible to receive credit facilities guaranteed under the scheme.
* **Coverage:** The guarantee ceiling is ₹10 crore per borrower. Guarantee coverage ranges from 75% to 90% depending on the borrower category and geographical region.
**Impact and Evaluation:**
* The government has undertaken evaluation studies of the CGS in 2017 and 2021 to assess its effectiveness in promoting MSME growth and access to finance.
* In Tamil Nadu, the following number of guarantees were approved under the CGS:
* 2022-23: 61,883 guarantees amounting to ₹7,114 crore.
* 2023-24: 113,815 guarantees amounting to ₹15,061 crore.
* 2024-25: 179,817 guarantees amounting to ₹21,447 crore.
**Recent Reforms and Expansion:**
* The CGS was revamped effective April 1, 2023, following a ₹9,000 crore corpus infusion into CGTMSE.
* The guarantee coverage ceiling was enhanced from ₹2 crore to ₹5 crore as part of the revamp in 2023.
* The Standard Rate of the Annual Guarantee Fee (AGF) was reduced by 50%, to as low as 0.37% per annum.
* Effective April 1, 2025, the guarantee coverage ceiling was further enhanced from ₹5 crore to ₹10 crore.
* The Annual Guarantee Fee was rationalized for guarantees above ₹1 crore, effective April 1, 2025.
These reforms aim to expand the scope of the CGS and ensure greater access to credit for MSEs, especially those in rural areas and emerging sectors.
Key Entities Referenced
Credit Guarantee Scheme: A scheme implemented by the Ministry of Micro, Small and Medium Enterprises to provide credit guarantees to Member Lending Institutions for credit facilities extended to Micro and Small Enterprises.
Micro, Small and Medium Enterprises: A category of businesses defined by the Indian government, often abbreviated as MSMEs.
Tamil Nadu: A state in southern India where the number of MSMEs availing benefits under the Credit Guarantee Scheme is tracked.
Credit Guarantee Fund Trust for Micro and Small Enterprises: A trust (CGTMSE) through which the Credit Guarantee Scheme (CGS) for Micro and Small Enterprises (MSEs) is implemented.
Ministry of Micro, Small and Medium Enterprises: The Indian government ministry responsible for the development of micro, small and medium enterprises.
SUSHRI SHOBHA KARANDLAJE: Minister of State for Micro, Small and Medium Enterprises.
Annual Guarantee Fee: A fee (AGF) associated with the Credit Guarantee Scheme, which has been rationalized and reduced to promote greater access to credit.
LOK SABHA: The lower house of the Parliament of India, where the question regarding the Credit Guarantee Scheme was raised.
GOVERNMENT OF INDIA
MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES
LOK SABHA
UNSTARRED QUESTION NO. 4698
TO BE ANSWERED ON 21.08.2025
CREDIT GUARANTEE SCHEME
4698. SHRI MALAIYARASAN D:
Will the Minister of MICRO, SMALL AND MEDIUM ENTERPRISES be pleased to state:
(a) the details of the Credit Guarantee Scheme including its objectives, eligibility criteria and
coverage;
(b) the number of Micro, Small and Medium Enterprises (MSMEs) that have availed benefits
under the Credit Guarantee Scheme during the last three years in the State of Tamil Nadu;
(c) whether the Government has undertaken any evaluation or impact assessment of the Credit
Guarantee Scheme to measure its effectiveness in promoting MSME growth and access to finance;
(d) the steps being taken to expand the scope of the Credit Guarantee Scheme to ensure greater
access to credit, particularly for MSMEs in rural areas or those in emerging sectors; and
(e) whether the Government is considering to bring any reforms to the Credit Guarantee
Scheme and if so, the details thereof?
ANSWER
MINISTER OF STATE FOR MICRO, SMALL AND MEDIUM ENTERPRISES
(SUSHRI SHOBHA KARANDLAJE)
(a): The Ministry of Micro, Small and Medium Enterprises (MSME) implements the Credit
Guarantee Scheme (CGS) for Micro and Small Enterprises (MSEs) through Credit Guarantee Fund
Trust for Micro and Small Enterprises (CGTMSE) with an objective to provide credit guarantees to
its Member Lending Institutions for the credit facilities extended by them to the MSEs without any
collateral security and third-party guarantee. Guarantee ceiling under the Scheme is Rs.10 crore per
borrower and the extent of guarantee coverage ranges from 75% to 90%, as per the category of
borrower and /or geographical region.
(b): The total number of guarantees extended to MSEs under the Scheme in the last three years
in the State of Tamil Nadu is as follows:
CGS - Guarantees Approved- Tamil Nadu
Financial Year No. of Guarantees approved Amount approved (in Rs.
Crore)
2022-23 61,883 7,114
2023-24 1,13,815 15,061
2024-25 1,79,817 21,447: 2 :
(c): To measure the effectiveness of CGS in promoting MSEs growth and access to finance, the
Government has undertaken evaluation study of the Scheme in 2017 and 2021.
(d) and (e): To expand the scope of the Scheme and to ensure greater access to credit for MSEs,
including those in rural areas and in emerging sectors, CGS was revamped effective from
01.04.2023, following a corpus infusion of Rs. 9,000 crore into CGTMSE. As part of the revamp,
the ceiling of guarantee coverage was enhanced from Rs. 2 crore to Rs.5 crore and the Standard
Rate of the Annual Guarantee Fee (AGF) was reduced by 50%, to as low as 0.37% per annum.
Further, the Ministry of MSME, Government of India, has recently enhanced the ceiling of
guarantee coverage from Rs.5 crore to Rs.10 crore and has rationalised the Annual Guarantee Fee
for guarantees above Rs.1 crore, effective from 01.04.2025.
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