CGTMSE scheme eligibility: which businesses and loans qualify for cover

CGTMSE scheme eligibility at a glance

CGTMSE eligibility has three parts: the borrower, the loan and the lender. All three must fit. You do not apply to CGTMSE yourself. Your lender applies for cover after it sanctions the loan (CGTMSE).

Meeting these tests makes a loan eligible for cover. It does not make a lender approve the loan. The lender decides on its own assessment, and it chooses whether to seek cover.

What counts as micro and small: the turnover limit

CGTMSE covers micro and small enterprises, so the size limits of the MSME classification decide whether your business is eligible. Those limits were raised from 01-Apr-2025 by gazette notification S.O. 1364(E) (Udyam Registration portal, Udyam gazette notification).

Four rules apply to the test:

• Both limits apply together. If you cross either the investment or the turnover ceiling for your category, you move up (Udyam gazette notification).
• Exports do not count. Export turnover is left out when turnover is calculated (Udyam gazette notification).
• Growth gives a grace period. A unit that grows past its category keeps its status until one year after the close of the year of registration (Udyam gazette notification).
• Banks follow the Udyam certificate. Banks classify an enterprise by the classification recorded in its Udyam Registration Certificate (RBI Master Direction, lending to MSME sector).

Before 01-Apr-2025 the limits were lower. A micro enterprise was capped at ₹1,00,00,000 investment and ₹5,00,00,000 turnover (Udyam Registration portal). Many pages still print the old numbers. Read more in MSME classification.

Which loans are not eligible

The scheme excludes these loans (CGTMSE scheme document):

• loans secured by collateral or a third-party guarantee, except the unsecured part of a hybrid loan;
• loans already covered through the National Credit Guarantee Trustee Company, such as the guarantee behind Mudra loans;
• loans covered by another guarantee, an insurer or a government scheme, to the extent they are covered;
• loans of medium enterprises (CGTMSE scheme document).

The Mudra vs CGTMSE guide explains why a Mudra loan is not covered by CGTMSE.

Can an existing loan get CGTMSE cover?

Possibly. A lender can apply for cover at any time during the life of the loan. The loan must not have been restructured, and must not have been in the SMA2 stage (a late-payment stress category used by RBI) in the last year. On the date the fee is paid, the loan must be standard and regular, the business must be running, and the money must not have been used to repay an old bad debt without the trust's consent (CGTMSE scheme document).

So an existing, well-conducted loan can be added. The lender must choose to do so and pay the fee.

What the lender checks beyond the scheme

Scheme eligibility is only the first test. The lender also reads your repayment record, your cash flow and the use of the money, as it would for any loan. Cover does not replace that check (CGTMSE). A business that is eligible on paper can still be refused if the file looks weak.

Is Udyam registration required for CGTMSE?

The scheme document, updated on 01-Apr-2026, does not name Udyam registration as a condition (CGTMSE scheme document). Two things still point towards registering. Banks classify a unit by its Udyam certificate (RBI Master Direction, lending to MSME sector). The Micro Credit Card needs Udyam registration (CGTMSE circular 259).

Udyam is free, paperless and based on Aadhaar, so it costs nothing to register (Udyam Registration portal). See the Udyam registration guide.

Can a new business get CGTMSE cover?

Yes. The scheme's definition of an eligible borrower includes new enterprises (CGTMSE scheme document). The lender must still believe the business can repay. Above ₹50,00,000, its internal rating must be investment grade (CGTMSE scheme document). A first-time business usually starts with a smaller loan. The CGTMSE scheme guide covers new businesses in more detail.

Common reasons a loan does not get cover

• The loan has collateral. Only the unsecured part of a hybrid loan can be covered (CGTMSE scheme document).
• The loan is above ₹50,00,000 and the lender's own rating is below investment grade (CGTMSE scheme document).
• The loan is already covered through NCGTC (CGTMSE scheme document).
• The account is in stress. A loan that was restructured, or was in SMA2 in the last year, is not accepted for fresh cover (CGTMSE scheme document).
• The lender is not registered with CGTMSE, or chooses not to apply (CGTMSE).

The loan can also fall outside the size ceiling for that type of lender. That is covered next.

How big a loan can be covered

The ceiling depends on the lender. It is ₹10,00,00,000 at public sector, private sector and foreign banks and select financial institutions. It is ₹2,00,00,000 at small finance banks, regional rural banks, state financial institutions and co-operative banks, and ₹50,00,000 at microfinance institutions (CGTMSE scheme document). Loans from several lenders to one borrower are covered up to ₹10,00,00,000 in all, subject to each lender's own ceiling (CGTMSE scheme document). See CGTMSE coverage and claims.

Your next step

Cover helps only after a lender decides to lend. Run the free loan readiness check to see how a lender is likely to read your business. Then read the CGTMSE guide, the CGTMSE fee guide and the government schemes hub. The MSME loan eligibility guide covers lender tests beyond the scheme.