CGTMSE coverage: how much of a loan is covered, the limits, and how claims work

CGTMSE coverage by borrower category

CGTMSE coverage is not the share of your loan the trust pays you. It is the share of the lender's loss the trust will pay the lender if the loan fails. The loss is called the amount in default: the principal and interest outstanding when the account turned bad, or on the claim date if that is lower, up to the amount covered (CGTMSE scheme document).

For guarantees approved on or after 01-Apr-2025, the CGS-I scheme document sets these maximum cover levels (CGTMSE scheme document).

Credit-deficient districts get 5 points more. In districts RBI identifies as credit-deficient, cover rises by 5 points: 75% becomes 80%, 80% becomes 85%, and 85% becomes 90%. This has applied since 15-Dec-2023 (CGTMSE scheme document).

Women entrepreneurs moved to 90% for guarantees issued on or after 01-Apr-2024, up from 85% (CGTMSE circular 241). See business loans for women entrepreneurs for what else changes.

Trading businesses get the same cover as manufacturing and services (CGTMSE scheme document). Guarantees approved before 01-Apr-2025 keep the cover levels that applied when they were approved (CGTMSE scheme document).

CGTMSE loan limit by lender type

The largest loan that can be covered depends on who lends (CGTMSE scheme document).

The higher ceiling of ₹10,00,00,000 applies only to the first group in the table: public sector, private sector and foreign banks and select financial institutions. It rose from ₹5,00,00,000 for guarantees approved on or after 01-Apr-2025, following the Union Budget 2025-26 (CGTMSE circular 250). The ₹2,00,00,000 and ₹50,00,000 ceilings for the other lender types are those in the scheme document updated on 01-Apr-2026 (CGTMSE scheme document).

CGTMSE loan limit without collateral

Two separate rules decide when you can borrow without collateral. They are often confused.

So below ₹20,00,000 a bank cannot ask for collateral at all (RBI notification, 09-Feb-2026). Above that, CGTMSE cover lets a lender agree to lend without collateral, or with collateral on only part of the loan. Whether it does is the lender's choice.

Worked example: a loan with part collateral

CGTMSE's scheme document gives this example of hybrid security (CGTMSE scheme document).

As the loan is repaid, the uncovered part shrinks first. Once the balance falls to the value of the collateral, there is nothing left to cover. No fee is charged and the cover closes (CGTMSE scheme document). For you, this means the fee on a hybrid loan falls faster than on a fully unsecured one.

How long CGTMSE cover lasts

• Term loans: for the agreed tenure (the repayment period) plus four months (CGTMSE scheme document).
• Working capital only: in blocks of five years from the guarantee start date, renewable (CGTMSE scheme document).

The lender must keep paying the annual fee for the cover to stay alive. The CGTMSE fee guide explains how it is charged.

Larger loans need an investment-grade rating

For loans above ₹50,00,000, the lender must rate the loan internally, and the rating must be investment grade (CGTMSE scheme document). In plain terms, the bigger the covered loan, the stronger the business has to look on the lender's own scorecard. Cover does not replace that assessment.

How a CGTMSE claim works if the loan fails

1. The account turns bad. A term loan becomes a non-performing asset (NPA) when payments are overdue for more than 90 days (RBI Master Circular on asset classification). The lender reports the NPA date to CGTMSE.
2. The lock-in period must pass. It is 18 months from the last disbursal or the guarantee start, whichever is later. For guarantees up to ₹10,00,000 with a tenure of up to 36 months, it is 9 months (CGTMSE scheme document).
3. The lender recalls the loan and starts recovery. Legal action is waived for claims up to ₹10,00,000 lodged from 01-Apr-2023 (CGTMSE scheme document).
4. The lender lodges a claim within 3 years of the NPA date or the end of the lock-in, whichever is later (CGTMSE scheme document).
5. CGTMSE pays 75% of the covered amount within 30 days of an eligible claim (CGTMSE scheme document).
6. The lender keeps recovering. Anything recovered is shared with CGTMSE first. The remaining 25% can be claimed 3 years after the first payment, or once a settlement is fully received, whichever is earlier (CGTMSE scheme document).

Some claims are refused. Accounts the lender classifies as fraud, wilful default or non-co-operative are not eligible. Nor is an account that turns NPA within 90 days of the material date (CGTMSE scheme document).

Does the borrower still owe the money after a claim?

Yes. The scheme says plainly that a claim paid to the lender "does not in any way take away the responsibility" of the lender to recover the entire amount from the borrower (CGTMSE scheme document).

What a default under a covered loan means for you:

• You owe the full outstanding amount, not just the uncovered part (CGTMSE scheme document).
• Recovery continues. The lender must chase the debt as hard as it would with no guarantee (CGTMSE scheme document).
• Your name can be published. The lender must secure CGTMSE's right to list defaulted borrowers' names and details on the trust's website (CGTMSE scheme document).
• Your credit record shows the default with every lender who checks it.

What CGTMSE coverage does not include

• Loans secured by collateral or a third-party guarantee, except the unsecured part of a hybrid loan (CGTMSE scheme document).
• Loans already covered through NCGTC, such as Mudra loans under CGFMU. One loan carries one cover (CGTMSE scheme document).
• Medium enterprises. Cover is for micro and small enterprises only (CGTMSE scheme document).

Your next step

Cover helps a lender say yes. It does not change what the lender needs to see. Use the free loan readiness check to see how lenders are likely to read your business, then compare unsecured business loans and loans against property. The CGTMSE scheme guide covers the basics, and the CGTMSE eligibility guide explains who qualifies.