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Mudra vs CGTMSE: what is the difference and which one applies to your loan

Mudra is a loan scheme for non-farm, non-corporate businesses needing up to ₹20,00,000, and its loans can carry the CGFMU guarantee. CGTMSE is a guarantee, not a loan, for collateral-free loans to micro and small enterprises. A loan already covered through NCGTC cannot also get CGTMSE cover.

Loan products, rates, and eligibility are determined by the lenders on our panel. Capnix is not a lender and does not lend its own capital. We run your loan journey end to end.

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Mudra vs CGTMSE: the short answer

Mudra and CGTMSE do different jobs. Mudra is a loan scheme. CGTMSE is a guarantee. Many pages mix them up, so here is the plain version.

  • Mudra lets lenders give small business loans of up to ₹20,00,000. A refinance body, MUDRA, backs the lenders (Mudra performance data).
  • CGTMSE promises a lender that it will pay part of the loss if a collateral-free loan to a micro or small enterprise goes bad (CGTMSE website).
  • The guarantee behind Mudra loans is not CGTMSE. It is the Credit Guarantee Fund for Micro Units (CGFMU), which the National Credit Guarantee Trustee Company (NCGTC) manages (PIB release on Mudra, 08-Apr-2025, NCGTC CGFMU FAQ).

Mudra vs CGTMSE side by side

Mudra (PMMY) CGTMSE Source
What it is A loan scheme. MUDRA refinances banks, NBFCs and microfinance lenders and does not lend itself A credit guarantee to the lender, not a loan Mudra performance data, CGTMSE website
Who runs it MUDRA, with the CGFMU fund run by NCGTC A trust set up jointly by the Ministry of MSME and SIDBI PIB release on Mudra, 08-Apr-2025, CGTMSE
Largest amount ₹20,00,000 per borrower Cover up to ₹10,00,00,000 at public sector, private sector and foreign banks. Lower ceilings at other lender types Mudra loan categories, CGTMSE scheme document
Who qualifies Non-corporate, non-farm, income-generating activity. Mudra's FAQ also lists companies New or existing micro and small enterprises Mudra FAQ, PIB press release, CGTMSE scheme document, updated 01-Apr-2026
Guarantee behind the loan CGFMU, through NCGTC CGTMSE itself PIB release on Mudra, 08-Apr-2025, CGTMSE website
Collateral None for loans up to ₹20,00,000 at banks for micro and small enterprises, from 01-Apr-2026 Loans without collateral or a third-party guarantee. A hybrid loan covers the unsecured part RBI notification, 09-Feb-2026, CGTMSE scheme document, updated 01-Apr-2026
Guarantee fee 1% a year on the sanctioned amount in the first year, then on the outstanding amount 0.37% to 1.20% a year by slab NCGTC CGFMU FAQ, CGTMSE scheme document, updated 01-Apr-2026
Interest rate Set by the lender Set by the lender Mudra FAQ
How you apply At a lender, or on a government portal At a registered lender, which applies for cover after sanction Mudra performance data, CGTMSE website
Women Nearly 68% of accounts go to women 90% cover for women entrepreneurs PIB press release, CGTMSE scheme document, updated 01-Apr-2026

The interest rate and the decision always belong to the lender. A guarantee changes the lender's risk, not your rate.

Can a Mudra loan be covered by CGTMSE?

No. CGTMSE's scheme document says a credit facility is not eligible if it has been covered for guarantee through NCGTC (CGTMSE scheme document, CGTMSE scheme document, updated 01-Apr-2026). A loan can carry one cover, not two.

So if your Mudra loan carries the CGFMU guarantee, CGTMSE cannot also cover it. The guarantee fee on such a loan is the CGFMU fee, and not a CGTMSE fee. That is why a search for "CGTMSE fee for Mudra loan" has no real answer.

One caution. The CGFMU is optional for the lender. A lender may apply for cover on a Mudra loan that qualifies, and it may choose not to (NCGTC CGFMU FAQ). So we cannot say every Mudra loan carries the CGFMU guarantee. Ask your lender which guarantee, if any, sits behind your loan.

How the two guarantees work

CGFMU (behind Mudra) CGTMSE Source
Who can apply for cover The lender, at its discretion The lender, after sanction NCGTC CGFMU FAQ, CGTMSE website
What the lender bears The first 3% of the amount in default The lender claims the covered share of its loss NCGTC CGFMU FAQ, CGTMSE scheme document
What the fund pays 75% of the amount in default after that, capped at 15% of the lender's pool of covered loans 75% of the covered amount within 30 days of an eligible claim, with the balance later NCGTC CGFMU FAQ, CGTMSE scheme document
Loans covered Micro loans up to ₹20,00,000 from banks, NBFCs, microfinance lenders and others Collateral-free loans to micro and small enterprises from registered lenders NCGTC CGFMU FAQ, CGTMSE scheme document, updated 01-Apr-2026

In both cases the borrower still owes the debt. A guarantee pays the lender, and it does not clear what you owe. CGTMSE says so in its scheme document, and CGFMU lenders keep recovering after a claim (CGTMSE scheme document, updated 01-Apr-2026, NCGTC CGFMU FAQ).

When each one is relevant

Mudra is the scheme to read about if:

A CGTMSE-covered loan is the scheme to read about if:

This table does not recommend a scheme for your business. A lender decides whether to lend, and whether to seek cover. Use the government schemes hub to see the other options.

What both leave unchanged

An example

Two illustrations, with no promised outcome:

  • A sole proprietor with a tailoring unit needs a loan below ₹20,00,000. Mudra is the scheme that fits the size and the structure. The lender decides whether to lend.
  • A private limited company that makes packaging needs a collateral-free loan above ₹20,00,000. Mudra's limit is too small. A lender may offer a loan with CGTMSE cover if the company is a micro or small enterprise.

Your next step

Which route a lender offers depends on how it reads your business. Get your free Capnix score first. Then read the Mudra loan guide, the CGTMSE guide and the CGTMSE fee guide. For loans without collateral, see government-backed business loans.

Frequently asked questions

Mudra is a loan scheme for small businesses with loans up to ₹20,00,000. CGTMSE is a guarantee that covers a lender's loss on collateral-free loans to micro and small enterprises (Mudra loan categories, CGTMSE website).

No. CGTMSE does not cover a loan already covered through NCGTC, and the Mudra guarantee is the CGFMU, which NCGTC manages (CGTMSE scheme document, PIB release on Mudra, 08-Apr-2025).

CGFMU covers micro loans up to ₹20,00,000 and is run by NCGTC. CGTMSE covers collateral-free loans to micro and small enterprises and is run by a trust set up by the Ministry of MSME and SIDBI (NCGTC CGFMU FAQ, CGTMSE).

Neither is better. They suit different loan sizes and structures. A lender decides which route to offer, so ask what guarantee, if any, backs your loan.

No. A Mudra loan with a guarantee carries the CGFMU fee, which is 1% a year on the sanctioned amount in the first year under the standard rate (NCGTC CGFMU FAQ).

It can be. Lenders may apply for CGFMU cover on eligible Mudra loans, but they are not required to (NCGTC CGFMU FAQ).

The lender pays it and may recover it from the borrower. Practice differs between lenders (CGTMSE scheme document, updated 01-Apr-2026, NCGTC CGFMU FAQ).

Sources

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