The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), jointly set up by the Ministry of MSME and the Small Industries Development Bank of India (SIDBI), enables collateral-free credit delivery across India. To sustain the guarantee fund, Member Lending Institutions (MLIs) pay an Annual Guarantee Fee (AGF), which is typically debited to the borrower's loan account.
Official CGS-I Fee Schedule (Effective April 1, 2025)
Under circular revisions implemented for the Credit Guarantee Scheme for Micro and Small Enterprises (CGS-I), the fee structure is tied strictly to the aggregate exposure band of the borrower. Unlike income tax slabs, CGTMSE does not use incremental brackets; the entire eligible loan or outstanding balance is assessed at the rate determined by the overall exposure tier:
| Total Credit Exposure Band | Standard Annual Base Rate | Applicable Base Basis |
|---|---|---|
| Up to ₹10 Lakh | 0.37% per annum | Guaranteed Amt (Yr 1) / Outstanding (Renewals) |
| Above ₹10 Lakh to ₹50 Lakh | 0.55% per annum | Guaranteed Amt (Yr 1) / Outstanding (Renewals) |
| Above ₹50 Lakh to ₹1 Crore | 0.60% per annum | Guaranteed Amt (Yr 1) / Outstanding (Renewals) |
| Above ₹1 Crore to ₹2 Crore | 0.85% per annum | Guaranteed Amt (Yr 1) / Outstanding (Renewals) |
| Above ₹2 Crore to ₹5 Crore | 1.00% per annum | Guaranteed Amt (Yr 1) / Outstanding (Renewals) |
| Above ₹5 Crore to ₹8 Crore | 1.10% per annum | Guaranteed Amt (Yr 1) / Outstanding (Renewals) |
| Above ₹8 Crore to ₹10 Crore | 1.20% per annum | Guaranteed Amt (Yr 1) / Outstanding (Renewals) |
First-Year vs Subsequent Renewal Years Basis
A fundamental difference governs the calculation across policy years:
- First Year Guarantee Fee: Calculated on the guaranteed amount approved by the Trust at the time of sanction. For example, for an 85% guarantee on a ₹40 lakh loan, the fee base is ₹34 lakh (or ₹40 lakh if full facility is guaranteed).
- Subsequent Renewal Fees: In all subsequent years, the fee is calculated strictly on the outstanding covered balance as on 31st March of the preceding financial year. As the borrower amortizes the principal, the annual fee drops progressively.
- GST Liability: All CGTMSE guarantee fees attract Goods and Services Tax (GST) at 18%, which is remitted to the government.
Category Concessions & Risk Adjustments
To incentivize inclusive entrepreneurship, CGTMSE grants explicit fee discounts on the base schedule:
- Women, SC/ST, and PwD Entrepreneurs: Eligible for a 15% rebate on the standard base rate.
- Special Geographies: Enterprises operating in the North Eastern Region (NER), Union Territories of Jammu & Kashmir and Ladakh, and Aspirational Districts receive a 10% concession.
- ZED Certification: Units holding Bronze, Silver, or Gold ZED certification under the Ministry of MSME receive an additional 10% concession.
- Lender Risk Surcharge: Based on the MLI's claim payout ratio and NPA track record under the Trust, CGTMSE may levy a risk premium ranging from 0.10% to 0.25% on the base rate.
Two Worked Examples
Example 1: Micro Enterprise First-Year Guarantee (Standard Category)
An MSE unit obtains a sanctioned working capital facility of ₹25,00,000 covered under CGTMSE. The lender falls in Tier 1 standard risk.
- Exposure Tier: ₹10 Lakh to ₹50 Lakh → Base Rate = 0.55% p.a.
- First Year Base Fee: ₹25,00,000 × 0.55% = ₹13,750
- GST @ 18%: ₹13,750 × 0.18 = ₹2,475
- Total Charged: ₹13,750 + ₹2,475 = ₹16,225.
Example 2: Women-Owned Enterprise Renewal Year
A women-owned manufacturing enterprise has an initial sanction of ₹60 lakh. By Year 3, the outstanding principal as on 31st March has reduced to ₹38 lakh.
- Overall Exposure Band: ₹60 Lakh (Above ₹50L to ₹1 Cr) → Base Rate = 0.60% p.a.
- Women Concession (15%): 0.60% × (1 − 0.15) = 0.51% net rate.
- Renewal Base Fee: ₹38,00,000 (Outstanding) × 0.51% = ₹19,380
- GST @ 18%: ₹19,380 × 0.18 = ₹3,488.40
- Total Renewal Fee: ₹19,380 + ₹3,488.40 = ₹22,868.40.
Frequently Asked Questions
1. How is the CGTMSE annual guarantee fee calculated for MSME loans?
CGTMSE guarantee fees are determined based on the total borrower credit exposure slab under the CGS-I rate schedule. In the first year, the fee is charged on the sanctioned guaranteed amount. In subsequent renewal years, it is charged on the outstanding covered amount as on 31st March.
2. What are the standard CGTMSE CGS-I rate slabs effective from April 1, 2025?
Under the revised schedule: Up to ₹10 lakh is 0.37%; Above ₹10 lakh to ₹50 lakh is 0.55%; Above ₹50 lakh to ₹1 crore is 0.60%; Above ₹1 crore to ₹2 crore is 0.85%; Above ₹2 crore to ₹5 crore is 1.00%; Above ₹5 crore to ₹8 crore is 1.10%; and Above ₹8 crore to ₹10 crore is 1.20% per annum.
3. Does the CGTMSE fee operate like progressive income tax slabs?
No. CGTMSE fees do not operate on progressive incremental slabs. The entire qualifying guaranteed or outstanding balance is multiplied by the single applicable rate corresponding to the borrower's total aggregate exposure band.
4. Who pays the CGTMSE fee — the bank or the MSME borrower?
The Member Lending Institution (MLI) pays the fee directly to CGTMSE. However, under standard commercial banking loan sanction terms, the bank recovers this annual guarantee fee (plus applicable 18% GST) directly from the borrower's loan or operative account.
5. What concessions reduce the CGTMSE guarantee fee?
Special rate concessions (typically 10% to 15% discount on the base fee) are available for women entrepreneurs, SC/ST borrowers, units located in North Eastern Region / Aspirational Districts, and ZED-certified MSMEs.
Official References & Circular Guidelines
- CGTMSE Circular No. 226/2024-25: Modification in Annual Guarantee Fee (AGF) Structure for CGS-I effective from April 1, 2025.
- Ministry of MSME Policy Notification: Enhancement of CGTMSE guarantee cover ceiling to ₹10 Crore for micro and small enterprises.
- SIDBI Guidelines on Credit Guarantee Scheme for MSEs: Protocol on MLI claim settlement and recovery accounting.