CGTMSE Explained: How to Get a Collateral-Free Business Loan in Bihar

Many shop owners and small manufacturers in Bihar are turned away by banks for one reason: they have no land or house papers to offer as security. CGTMSE solves exactly this problem. It lets banks give a collateral-free business loan to micro and small enterprises because a government-backed trust guarantees most of the loan. This guide explains the current cover limit, guarantee percentages, fees, who pays them and how to ask your branch for a CGTMSE-covered loan.

What is CGTMSE?

CGTMSE stands for the Credit Guarantee Fund Trust for Micro and Small Enterprises. It was set up in 2000 by the Ministry of MSME and SIDBI. The idea is simple:

• You take a loan from a bank, NBFC or small finance bank.
• The bank does not ask for property or a third-party guarantor.
• In return, the bank gets a guarantee from CGTMSE on most of the loan. If the loan turns bad despite recovery efforts, CGTMSE pays the bank the guaranteed share.

The trust is not a lender. You never apply to CGTMSE directly; your bank applies on your behalf. The official site is cgtmse.in.

How much loan can be covered under CGTMSE?

From 1 April 2025, the guarantee ceiling was raised from ₹5 crore to ₹10 crore per borrower. Both term loans (machinery, equipment, shop fit-out) and working capital (cash credit, overdraft for stock) can be covered.

For most readers in Patna, Gaya or Sasaram, the loan need is far smaller, between ₹2 lakh and ₹50 lakh. The scheme covers these too, and the fee is lowest at this size.

Who is eligible for a CGTMSE loan?

• New and existing micro and small enterprises in manufacturing and services
• Retail and wholesale trade units are covered
• The unit should have Udyam registration
• The borrower must not be a defaulter, and the project must be viable in the bank's appraisal

Generally not covered: crop loans and agriculture, self-help group lending, education loans and loans already backed by collateral that the bank chose to take. Medium enterprises are outside this scheme.

Note that RBI instructions already ask banks not to take collateral for loans to micro and small enterprises up to ₹10 lakh. CGTMSE makes it much easier for banks to lend collateral-free above that too.

How much of the loan does CGTMSE guarantee?

The extent of guarantee depends on loan size and borrower category:

• Micro enterprises with loans up to ₹5 lakh: up to 85%
• Most other eligible loans: 75%
• Women-led enterprises: higher cover, raised to 90% in the latest revision
• Higher cover is also available for SC/ST entrepreneurs, units in the North-East and aspirational districts, and some other special categories

You don't need to calculate this yourself. The point to remember: because most of the loan is guaranteed, a bank manager can say yes without your house papers.

Hybrid security

If you do have some property but not enough, banks can use hybrid security: part of the loan is backed by your collateral and the rest is covered by CGTMSE. Ask about this if the bank insists on collateral for only part of the amount.

CGTMSE fee: how much and who pays?

CGTMSE charges an Annual Guarantee Fee (AGF). Standard rates for guarantees from 1 April 2025 are:

• Up to ₹10 lakh: 0.37% a year
• Above ₹10 lakh to ₹50 lakh: 0.55%
• Above ₹50 lakh to ₹1 crore: 0.60%
• Above ₹1 crore to ₹2 crore: 0.85%
• Above ₹2 crore to ₹5 crore: 1.00%
• Above ₹5 crore to ₹8 crore: 1.10%
• Above ₹8 crore to ₹10 crore: 1.20%

GST is extra. In the first year the fee is charged on the guaranteed amount; from the second year it is charged on the outstanding balance, so it falls as you repay. Certain categories such as women, SC/ST and units in aspirational districts get a concession on these rates, and the exact rate can also vary a little with the bank's own track record.

Who pays? The fee is legally payable by the bank to CGTMSE, but the scheme lets the bank decide whether to recover it from the borrower. Most banks pass it on. Always ask, and check your loan statement for a "CGTMSE fee" debit every year.

Worked example: a hardware shop in Dehri

Rajesh runs a hardware and sanitary shop in Dehri-on-Sone and wants to add a new line of pipes and fittings.

• Working capital (cash credit) needed: ₹12,00,000
• No property in his own name
• Udyam registered, three years of ITR, clean credit history

The bank sanctions ₹12 lakh with CGTMSE cover. With a 75% guarantee, CGTMSE covers ₹9 lakh of the bank's risk.

• First-year fee at 0.55% on ₹12 lakh: ₹6,600, plus GST
• If the outstanding drops to ₹8 lakh in a later year, that year's fee is calculated on the lower balance

For a much smaller loan, say a Patna mobile repair shop taking ₹4 lakh, the fee at 0.37% is about ₹1,480 a year plus GST. That is far cheaper than paying a lawyer and valuer to mortgage property.

How to ask your bank for a CGTMSE loan

1. Get Udyam registration and keep the certificate ready. It is free on udyamregistration.gov.in.
2. Prepare a short project report or loan note showing why you need the money and how you'll repay. See how to write a business plan for a bank loan.
3. Check your credit report first. A low score or old overdue is the most common reason for refusal. Our CIBIL score guide for business owners explains how to fix errors.
4. Meet the branch manager and say clearly: "I want this loan without collateral under CGTMSE cover."
5. Ask three questions: Will the bank pass on the CGTMSE fee? What interest rate and processing fee apply? How long will sanction take?
6. If refused, ask for the reason in writing, and try another bank. Public sector banks, the regional rural bank (Bihar Gramin Bank, formed in 2025 by merging the old Dakshin and Uttar Bihar Gramin Banks), private banks and small finance banks all participate.

Loans under schemes like PMEGP are often guaranteed through CGTMSE, while Mudra loans have their own guarantee fund. Read our guides on the PMEGP loan and subsidy and Mudra loan.

Important things CGTMSE does not do

• It does not waive your loan. The guarantee is for the bank's protection.
• It does not stop the default from appearing in your credit report.
• It does not force a bank to lend. The bank still judges your project and repayment capacity.
• It does not cover personal consumption loans.

Tips to get your CGTMSE loan approved

• Keep business money flowing through one current account, and accept UPI payments into it. Banks trust statements more than verbal claims.
• File ITR even if income is small; two or three years of returns make a big difference.
• Ask for a loan that matches your turnover. Asking ₹25 lakh against sales of ₹8 lakh a year will be rejected.
• Show existing customers and a visible online presence, such as a Google profile and a Bihar Directory listing.

Hindi readers can read बिना गारंटी बिज़नेस लोन (CGTMSE).

Next steps

Get your Udyam certificate, check your credit report and speak to two banks about a CGTMSE-covered loan. You can find banks and loan consultants near you on our Rohtas banking and financial services listings. And when your business is ready to grow, list your business free on Bihar Directory so more customers find you.

This is general information, not legal or financial advice. Confirm current CGTMSE limits and fees with your bank or cgtmse.in.