CGTMSE guarantee fee in 2026: what you actually pay
When a bank gives a micro or small enterprise a loan without collateral, it usually covers the loan with a guarantee from the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). The guarantee is not free: an annual guarantee fee (AGF) is charged every year, and in most cases the bank passes it on to you. Here is what the fee is, how it is worked out and what it adds to your cost of borrowing.
Updated 2026-10-26 · Funding Desk credit panel · Source: CGTMSE
Annual guarantee fee by loan slab
| Guarantee amount | Standard fee (% a year) | First-year fee at the top of the slab |
|---|---|---|
| Up to ₹10 lakh | 0.37% | ₹3,700 |
| Above ₹10 lakh to ₹50 lakh | 0.55% | ₹27,500 |
| Above ₹50 lakh to ₹1 crore | 0.60% | ₹60,000 |
| Above ₹1 crore to ₹2 crore | 1.20% | ₹2,40,000 |
| Above ₹2 crore to ₹5 crore | 1.35% | ₹6,75,000 |
The standard rate is adjusted for each lender: banks with a good CGTMSE record get a 10% discount, and those with more claims pay a risk premium of up to 70%. So the same ₹10 lakh loan may carry a fee of 0.33% at one bank and 0.63% at another. The fee for loans above ₹5 crore (the ceiling went up to ₹10 crore from 1 April 2025) should be confirmed with the bank.
Concessions
- Women entrepreneurs – lower fee, and guarantee cover of up to 90%
- SC/ST entrepreneurs, units in aspirational districts and ZED-certified units – lower fee
- Micro units with loans up to ₹5 lakh – 85% cover; most other loans – 75% cover
How the fee is calculated
- First year: on the guaranteed (sanctioned) amount
- Later years: on the principal outstanding, for term loans that are fully disbursed
- Working capital: on the limit
- Hybrid security (part property, part CGTMSE): only the part not covered by property is guaranteed, so the fee is charged on that part only
What it adds to your cost
Take a ₹40 lakh term loan for 5 years at 9.50%. The first-year fee at 0.55% is about ₹22,000, falling as the loan is repaid. Because the fee is charged each year on what is still outstanding, it works like about 0.55% added to the interest rate – so the loan really costs a little over 10% a year, before the processing fee. Funding Desk shows this all-in cost for every lender, so a collateral-free loan can be compared fairly with a loan against property.
Tips from our credit panel
- If you have some property, ask for hybrid security – the property covers part of the loan and CGTMSE the rest, and the fee applies only to the uncovered part.
- Ask the bank to write the fee and who bears it in the sanction letter.
- For loans up to ₹20 lakh to micro and small units, RBI does not allow banks to insist on collateral at all – you do not have to accept a demand for property.
- Compare the all-in cost, not just the interest rate. An NBFC loan with no guarantee fee is usually still costlier than a bank loan with CGTMSE.
Common questions
What is the CGTMSE fee for a ₹50 lakh loan?
The standard annual guarantee fee for the slab above ₹10 lakh and up to ₹50 lakh is 0.55% a year – about ₹27,500 in the first year on ₹50 lakh, and less each year as the loan is repaid. The actual rate can be 10% lower or up to 70% higher depending on the bank’s own CGTMSE track record.
Who pays the CGTMSE fee – the bank or the borrower?
The scheme leaves it to the lender. Most banks recover it from the borrower, usually by debiting the loan account once a year. Ask the bank to state it in the sanction letter.
Is the fee charged every year?
Yes. It is an annual fee for as long as the guarantee runs – on the sanctioned amount in the first year and on the outstanding amount after that. For working capital it is charged on the limit.
Is there a concession for women entrepreneurs?
Yes. Women entrepreneurs, SC/ST entrepreneurs, units in aspirational districts and ZED-certified units get a reduction in the fee, and women also get higher guarantee cover.
What is the maximum loan under CGTMSE?
From 1 April 2025, loans up to ₹10 crore per micro or small enterprise can be covered. Fee rates for the slab above ₹5 crore should be confirmed with the bank or on cgtmse.in.