CGSS vs CGTMSE: Which Credit Guarantee Covers Your Startup Loan?
CGSS guarantees loans to DPIIT-recognised startups. CGTMSE guarantees loans to micro and small enterprises. Here's how the two differ on cover, fees and collateral, and which one tends to fit your loan.
The Credit Guarantee Scheme for Startups (CGSS) guarantees loans to DPIIT-recognised startups, with cover of up to Rs 20 crore per borrower. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) guarantees loans to micro and small enterprises (MSEs), with cover of up to Rs 10 crore. Neither one gives you money. Both make a lender more willing to lend without collateral, and in both cases your lender applies for the guarantee, not you.
This comparison is based on official guidelines as of October 2026; always check the official portals for the latest rules.
CGSS vs CGTMSE at a glance
| CGSS | CGTMSE (CGS-I, for banks) | |
|---|---|---|
| Run by | NCGTC, sponsored by DPIIT | CGTMSE, a trust set up jointly by the Ministry of MSME and SIDBI |
| Who it covers | Startups recognised by DPIIT | New or existing micro and small enterprises, with a Udyam Registration Number |
| Maximum cover | Rs 20 crore per borrower | Rs 10 crore per borrower |
| Extent of cover | 85% of the amount in default for loans up to Rs 10 crore; 75% above Rs 10 crore | 75% to 90% of the amount in default, depending on loan size and borrower category, plus 5 percentage points in RBI-identified credit-deficient districts |
| Annual guarantee fee (paid by the lender) | 2% p.a.; 1.5% for North-East units and women entrepreneurs; 1% for the 27 Champion Sectors | Standard rate from 0.37% p.a. (up to Rs 10 lakh) to 1.20% p.a. (above Rs 8 crore to Rs 10 crore), adjusted for the lender's risk rating |
| Lenders | Scheduled commercial banks, financial institutions, eligible NBFCs (rated BBB or above) and SEBI-registered AIFs | Public sector, private and foreign banks, RRBs, co-operative banks, small finance banks, select FIs and MFIs; NBFCs under a separate scheme (CGS-II) |
| Collateral | Not required on the covered part; cover is net of any collateral | Collateral-free and third-party-guarantee-free; a hybrid model covers the unsecured part |
| Who applies | The lender, on the NCGTC portal | The lender, after sanctioning your loan |
Sources: the CGSS Gazette notification (8 May 2025), the NCGTC CGSS FAQ and the CGTMSE scheme document (updated as on 1 April 2026).
Who is covered
CGSS is only for startups recognised by DPIIT. The borrower must not be in default to any lending or investing institution, must not be classified as a Non-Performing Asset (NPA) under RBI guidelines, and must be certified as eligible by the lender (NCGTC CGSS FAQ).
DPIIT's current startup definition is in its notification of 4 February 2026. An eligible entity is a private limited company, registered partnership firm, LLP, or a co-operative society (multi-state or registered under a state or UT law), within 10 years of incorporation, with turnover of no more than Rs 200 crore in any financial year since then, working on innovation or a scalable business model. For recognised Deep Tech Startups, the limits are 20 years and Rs 300 crore.
CGTMSE covers new or existing micro and small enterprises in manufacturing or services. The scheme document adds that retail and wholesale trade and educational or training institutions are eligible activities. The CGTMSE FAQ on eligible borrowers excludes agriculture, self-help groups and joint liability groups, and says the lender must enter your Udyam Registration Number.
Whether you count as micro or small depends on investment and turnover. According to PIB's Budget 2025-26 release, the revised limits are:
- Micro: investment up to Rs 2.5 crore and turnover up to Rs 10 crore
- Small: investment up to Rs 25 crore and turnover up to Rs 100 crore
PIB's release of 3 April 2025 confirms that the Ministry of MSME notified the revision as S.O. 1364(E) on 21 March 2025. A medium enterprise isn't covered by CGTMSE.
How much is covered
CGSS. The PIB release of 9 May 2025 says the ceiling was raised from Rs 10 crore to Rs 20 crore per borrower. For loans from banks, FIs and NBFCs (transaction-based cover), the guarantee is 85% of the amount in default for loans up to Rs 10 crore and 75% above that. Venture debt funds (SEBI-registered AIFs) get umbrella cover instead: actual losses or up to 5% of the pooled investment in startups, whichever is lower, still capped at Rs 20 crore per borrower.
CGTMSE. Circular No. 250/2024-25 (18 March 2025) raised the ceiling from Rs 5 crore to Rs 10 crore for guarantees approved on or after 1 April 2025. The Rs 10 crore applies to public sector, private and foreign banks and select FIs. Small finance banks, RRBs, state financial institutions and co-operative banks can cover loans up to Rs 200 lakh, and microfinance institutions up to Rs 50 lakh.
The extent of CGTMSE cover depends on who you are and how much you borrow. For example, the scheme document lists 85% for micro enterprises on loans up to Rs 5 lakh, 90% for women entrepreneurs, 85% for SC/ST entrepreneurs and ZED-certified MSEs, and 75% for "all other category of borrowers". MSEs in RBI's Identified Credit Deficient Districts get an extra 5 percentage points.
What the guarantee costs
In both schemes, the lender pays the annual guarantee fee to the guarantor.
CGSS fees (Gazette notification, 8 May 2025):
- 2% p.a. as the standard rate
- 1.5% p.a. for units from the North-East region and for women entrepreneurs
- 1% p.a. for units in the 27 Champion Sectors identified under Make in India. These include IT and ITeS, biotechnology, pharmaceuticals and medical devices, electronics, food processing, education services and financial services (the NCGTC FAQ lists all 27).
The CGSS documents we reviewed don't say whether the lender may pass the fee on to you, so ask before you sign.
CGTMSE fees (scheme document, for guarantees approved or renewed on or after 1 April 2025): the standard rate rises with the size of the guarantee.
| Guarantee slab | Standard rate (p.a.) |
|---|---|
| Up to Rs 10 lakh | 0.37% |
| Above Rs 10 lakh to Rs 50 lakh | 0.55% |
| Above Rs 50 lakh to Rs 1 crore | 0.60% |
| Above Rs 1 crore to Rs 2 crore | 0.85% |
| Above Rs 2 crore to Rs 5 crore | 1.00% |
| Above Rs 5 crore to Rs 8 crore | 1.10% |
| Above Rs 8 crore to Rs 10 crore | 1.20% |
A lender with a better portfolio gets 10% off the standard rate, and a riskier one pays a premium of up to 70%. You may also get 10% off for each of three groups, up to 30% if you fall in all three:
- Social: women, SC/ST, PwD, transgender or Agniveer entrepreneurs
- Geographic: the North-East, J&K or Ladakh (up to Rs 50 lakh), an aspirational district or a credit-deficient district
- MSE status: ZED-certified MSEs
The fee is charged on the guaranteed amount in the first year and on the outstanding amount after that. The CGTMSE fee FAQ says whether to pass the fee on to you is left to the lender.
On the published standard rates, CGTMSE is cheaper for smaller loans. CGSS's champion-sector rate of 1% is below CGTMSE's standard rates above Rs 5 crore.
Collateral and personal guarantees
CGSS: JanSamarth's Loan for Startups page says no collateral is required for accounts covered under CGSS. If you do offer collateral, the guarantee covers only the unsecured part. The NCGTC FAQ explains it with an example: on Rs 25 crore of debt backed by Rs 8 crore of collateral, cover is limited to Rs 17 crore. The FAQ also says a lender may ask for a personal guarantee if you've declared assets or offered collateral.
CGTMSE: loans must be free of collateral and third-party guarantees. Under the scheme's definitions, a guarantee from the promoter directors of a company, or the partners of a firm or LLP, isn't a "third-party guarantee", so a lender can still ask for yours. A hybrid model lets the lender take collateral for part of the loan and cover the rest with CGTMSE.
Who applies
You don't apply to NCGTC or CGTMSE. You apply for a loan with a registered lender, and the lender seeks the cover:
- CGSS: the lender checks your proposal and applies on NCGTC's portal. Cover is issued automatically if the eligibility conditions are met (NCGTC FAQ). You can also apply online through JanSamarth.
- CGTMSE: you approach a lender registered with CGTMSE, which sanctions the loan and then lodges the guarantee application (CGTMSE home page).
The lending decision is always the lender's. A guarantee lowers their risk but doesn't oblige them to lend.
Which one tends to fit your loan
- Not DPIIT-recognised? CGSS isn't open to you. If you have Udyam registration and meet the micro or small limits, CGTMSE is the route.
- No Udyam registration, or you've grown past "small"? CGTMSE isn't open to you, but CGSS may be if you're a recognised startup.
- Need cover above Rs 10 crore? Only CGSS goes up to Rs 20 crore.
- Borrowing from a venture debt fund? CGSS has umbrella cover for SEBI-registered AIFs. CGTMSE's bank scheme doesn't list AIFs as lenders.
- Small working-capital or term loan from a bank? Both can work. CGTMSE has lower published fees at smaller slabs, and the women-entrepreneur cover is 90%.
- Not sure which your lender uses? Ask. Lenders register with NCGTC and CGTMSE separately, so a lender may offer one scheme and not the other.
Can a startup use both?
You can be eligible for both: a DPIIT-recognised startup that is also a micro or small enterprise with Udyam registration meets each scheme's borrower test. But the same loan can't be covered twice. The CGSS Gazette notification says a facility covered under CGSS "should not have been covered under any other guarantee scheme". The documents we reviewed don't say whether separate loans can sit under each scheme at the same time, so confirm this with your lender.
FAQ
Is CGSS or CGTMSE a loan or a grant?
Neither. Both are guarantees given to your lender. You still borrow and repay with interest. CGSS sets no cap on the interest rate: lenders charge as per their own guidelines (NCGTC FAQ).
What is the maximum cover under each scheme?
CGSS covers up to Rs 20 crore per borrower. CGTMSE covers up to Rs 10 crore through banks and select FIs, with lower caps for small finance banks, RRBs, co-operative banks and MFIs.
Do I need Udyam registration for CGTMSE?
Yes. CGTMSE's FAQ says it's mandatory for the lender to obtain the Udyam Registration Number of every borrower.
Does my startup need DPIIT recognition for CGSS?
Yes. Only DPIIT-recognised startups can be covered. See our guide on how to get a CGSS-backed loan.
Can I switch an existing ECLGS loan to CGSS?
The NCGTC FAQ says that if you've taken an ECLGS loan and want CGSS, the ECLGS loan has to be closed.
Where can I compare the schemes?
See our CGSS listing, CGTMSE listing and business loans. For help with an application, see our services.
Sources
- Gazette notification on CGSS, S.O. 2046(E), 8 May 2025 (via NCGTC)
- NCGTC: CGSS FAQ, amended as on 8 May 2025
- NCGTC: CGSS product page
- PIB: Government notifies expansion of CGSS (9 May 2025)
- DPIIT notification on startups, G.S.R. 108(E), 4 February 2026 (via NCGTC)
- CGTMSE: Credit Guarantee Scheme I, scheme document updated as on 1 April 2026
- CGTMSE: Circular No. 250/2024-25, ceiling raised to Rs 10 crore (18 March 2025)
- CGTMSE: FAQ on eligible borrowers
- CGTMSE: FAQ on annual guarantee fee
- CGTMSE: home page
- PIB: Union Budget 2025-26 measures for MSMEs (1 February 2025)
- PIB: Revision in eligibility criteria for IEM acknowledgement, citing S.O. 1364(E) (3 April 2025)
- JanSamarth: Loan for Startups
Cover photo: Chethana Muniswamygowda on Unsplash
