The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has rolled out a series of significant updates that strengthen credit access for MSMEs, with a special focus on women entrepreneurs, Agniveers, and enterprises in underserved regions. These policy changes, effective from April 2024 and April 2025, will reshape how banks and financial institutions support small businesses in India.

1. 90% Guarantee Coverage for Women-led Enterprises

Circular No. 241/2024-25 | Dated Dec 10, 2024

In recognition of the vital role women-led businesses play in economic growth, CGTMSE has enhanced the guarantee coverage from 85% to 90% under its Credit Guarantee Schemes (CGS I, II & III). For enterprises located in Credit Deficient Districts (ICDDs), this coverage increases further to 95%.

Revised Guarantee Coverage Matrix

Category	Up to ₹5 lakh	₹5 lakh – ₹50 lakh	₹50 lakh – ₹500 lakh
Micro Enterprises	85%	75%	75%
MSEs in NE, J&K, Ladakh	80%	-	-
Women / Agniveers	90%	90%	90%
SC/ST, Aspirational Districts, ZED, PwD	85%	85%	85%
All other borrowers	75%	75%	75%

Effective from: April 1, 2024
Applicability: New guarantees only (not enhancements of existing working capital accounts).

2. Increased Guarantee Ceiling under CGS – I

Circular No. 250/2024-25 | Ref. No. 273 | Dated Mar 18, 2025

In line with the Union Budget 2025-26 announcement, CGTMSE has raised the maximum ceiling of guarantee coverage under Credit Guarantee Scheme – I (for Banks) from ₹5 crore to ₹10 crore.

Annual Guarantee Fee (AGF) for High-Value Loans

Slab (₹)	AGF Standard Rate (%)
Above 5 crore – 8 crore	1.10%
Above 8 crore – 10 crore	1.20%

Effective from: April 1, 2025 (including enhancements in working capital of existing covered accounts).

3. Reduced Annual Guarantee Fee under CGS – III

Circular No. 252/2024-25 | Ref. No. 44/282 | Dated Apr 1, 2025

To lower the cost of credit for MSMEs, CGTMSE has reduced the Annual Guarantee Fee (AGF) for loans above ₹1 crore up to ₹5 crore under CGS – III.

Revised AGF Structure (CGS III)

Slab (₹)	AGF (%)
0 – 10 lakh	0.37%
Above 10 lakh – 50 lakh	0.55%
Above 50 lakh – 1 crore	0.60%
Above 1 crore – 2 crore	0.85%
Above 2 crore – 5 crore	1.00%

Effective from: April 1, 2025.

4. Modification in Definition of Third-Party Guarantee under CGS – I

Circular No. 254/2025-26 | Ref. No. CGTMSE/107 | Dated Jul 09, 2025

CGTMSE has revised the definition of third-party guarantee under CGS – I.

Key Change:

• Guarantees provided by co-obligant / co-borrower, who are also signatories to the loan agreement in respect of proprietary / individual concerns, shall not be treated as third-party guarantees.

Comparison of Provisions

S. No.	Existing Provision	Modified Provision
2(xv)	Third Party Guarantee means any guarantee obtained by a Member Lending Institution in connection with the credit facility extended by it to a borrower except from Sole-Proprietor in case of Sole Proprietary concern, Partners in case of partnership/ LLP, Trustees in case of Trust, Karta & Coparceners in case of HUF, and promoter directors in case of private/public limited companies.	Third Party Guarantee means any guarantee obtained by a Member Lending Institution in connection with the credit facility extended by it to a borrower except from Sole-Proprietor/ Co-borrower/ Co-obligant who are also signatories to the loan agreement in case of Sole Proprietary/ Individual concern, Partners in case of partnership/ LLP, Trustees in case of Trust, Karta & Coparceners in case of HUF, and promoter directors in case of private/public limited companies.

Applicability: With immediate effect (including already lodged claim cases yet to be settled).

Why These Updates Matter

• Women Entrepreneurs: Stronger access to credit with reduced collateral needs.
• Banks & NBFCs: Lower lending risks, encouraging broader MSME financing.
• Large MSME Loans: Coverage limit increased to ₹10 crore, supporting scaling businesses.
• Cost Reduction: Lower guarantee fees make credit more affordable.
• Simplified Guarantee Rules: Clarity on third-party guarantees makes compliance easier for banks and borrowers.

Conclusion

These updates from CGTMSE mark a transformative step in inclusive MSME financing. By enhancing guarantee coverage for women, expanding the ceiling for large loans, reducing fees, and simplifying guarantee definitions, the Trust is ensuring that small businesses have better access to affordable and risk-mitigated credit. This will not only boost entrepreneurial growth but also accelerate India’s journey towards women-led and inclusive economic development.