Credit Guarantees for Small Business

CGTMSE began guaranteeing collateral-free loans to micro and small enterprises in 2000, and by 28 February 2023 it had approved 69,04,649 guarantees worth ₹4,06,310 crore. Annual approvals ranged between ₹19,066 crore and ₹21,275 crore from 2014-15 to 2017-18 and reached ₹45,851 crore in 2019-20. In May 2020, during the COVID-19 lockdown, the Cabinet approved the Emergency Credit Line Guarantee Scheme, with 100% guarantee cover from NCGTC for up to ₹3 lakh crore of additional funding to eligible MSMEs and Mudra borrowers. ECLGS 2.0 (November 2020) extended it to 26 sectors identified by the Kamath Committee and the healthcare sector, and in August 2022 the Cabinet raised the limit from ₹4.5 lakh crore to ₹5 lakh crore, earmarking the addition for hospitality and related enterprises.

CGTMSE's scheme was revamped from 1 April 2023: the Finance Minister announced ₹9,000 crore for its corpus (₹8,000 crore was infused on 30 March 2023), the guarantee ceiling rose from ₹2 crore to ₹5 crore, and the annual guarantee fee for loans up to ₹1 crore was cut from a peak of 2% to as low as 0.37% a year. Approvals rose from ₹1,04,781 crore in 2022-23 to ₹2,02,807 crore in 2023-24, ₹3,05,507 crore in 2024-25 and ₹4,32,547 crore in 2025-26. In December 2025 the Ministry of MSME told the Lok Sabha that ₹5.08 lakh crore had been approved in the past two years, against ₹4.26 lakh crore over the previous twenty-three years. The emergency scheme closed on 31 March 2023 after 1.19 crore guarantees worth ₹3.68 lakh crore; in a February 2023 reply, the Minister cited a State Bank of India research report that almost 14.6 lakh MSME accounts were saved.

Banks and other lenders register as Member Lending Institutions, pay an annual guarantee fee and are covered for part of the loss if a guaranteed loan defaults; 277 institutions were registered with CGTMSE on 31 March 2025. From 1 April 2025 CGTMSE covers loans of up to ₹10 crore per borrower, with cover of 75% to 90% depending on the borrower category and region. NCGTC, a company wholly owned by the Department of Financial Services, runs the other schemes: the Credit Guarantee Scheme for Startups, notified on 6 October 2022 and operational from 1 April 2023, covers up to ₹20 crore per borrower since May 2025. The Mutual Credit Guarantee Scheme for MSMEs, launched in January 2025, gives 60% cover on loans of up to ₹100 crore for equipment and machinery, with ₹500 crore of Government contribution to its corpus.

ECLGS 5.0, approved by the Cabinet on 5 May 2026 for businesses and airlines affected by the West Asia situation, runs until 31 March 2027 or until guarantees of ₹2.55 lakh crore are issued, with ₹5,000 crore earmarked for airlines. By 20 August 2026 it had issued 6,73,979 guarantees worth ₹2,50,024 crore, and MSMEs accounted for 97.3% of them by number. CGTMSE approved 5,18,587 guarantees worth ₹1,01,687 crore in 2026-27 up to 30 June 2026. The mutual scheme has had a slower start, with 23 loans worth ₹173.39 crore guaranteed by 31 December 2025; in March 2026 it was modified to include service-sector MSMEs and to add special provisions for exporters.

₹13.67 lakh crore cumulative CGTMSE coverage across 1.41 crore guarantees (March 2026). CGTMSE guarantees approved a year: ₹18,188 crore (2013-14), ₹45,851 crore (2019-20), ₹1,04,781 crore (2022-23) and ₹4,32,547 crore (2025-26). ECLGS 1.0 to 4.0: 1.19 crore guarantees worth ₹3.68 lakh crore (to March 2023). ECLGS 5.0: 6,73,979 guarantees worth ₹2,50,024 crore (20 August 2026). Startups scheme: 478 loans of about ₹1,469.92 crore (30 June 2026). Sources: Ministry of MSME, Ministry of Finance and DPIIT replies in the Lok Sabha; PIB releases, factsheets and backgrounders.