For many small businesses in India, the most difficult part of raising capital is not the business idea — it’s the lack of collateral. Banks ask for property, land, machinery, or FD security before approving loans. But what if you’re a new entrepreneur, a startup founder, a trader, or a service provider without any fixed collateral?
This is the exact gap the CGTMSE Scheme tries to fill — and it has transformed how MSMEs get financed. But while the scheme is popular, one question consistently puzzles borrowers:
“How much do CGTMSE Fees cost, and is it worth paying?”
This article breaks down what CGTMSE fees are, how they work, who pays them, historical fee trends, renewal charges, and how fees have changed in 2025, using official sources — and written in simple language.
What Exactly Are CGTMSE Fees? (Simple Explanation)
CGTMSE fees are not a hidden penalty or a bank trick. They are the Annual Guarantee Fees (AGF) charged by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to guarantee a collateral-free MSME loan.
Think of it as a financial safety net for banks:
- If the borrower defaults,
- CGTMSE compensates a percentage of the loan to the bank.
This makes banks more willing to offer loans to small businesses without asking for property.
📍 Key point:
CGTMSE fees are not one-time — they are annual fees.
Who Pays the CGTMSE Fees — Borrower or Bank?
Officially, CGTMSE charges fees to banks (called MLIs – Member Lending Institutions).
In practice, banks almost always recover it from the borrower.
This recovery is legal and standard practice across banks.
2025 Fee Structure — How Much Do CGTMSE Fees Cost?
CGTMSE revised its fee structure effective 1 April 2025.
Here are the latest slabs:
| Loan Slab (₹) | Annual Guarantee Fee |
|---|---|
| Up to ₹10 Lakh | 0.37% |
| ₹10 L – ₹50 L | 0.55% |
| ₹50 L – ₹1 Cr | 0.60% |
| ₹1 – ₹2 Cr | 0.85% |
| ₹2 – ₹5 Cr | 1.00% |
| ₹5 – ₹8 Cr | 1.10% |
| ₹8 – ₹10 Cr | 1.20% |
CGTMSE Fees Are Not Static — They Change With Policy
A common misunderstanding is thinking the fee is like stamp duty or registration fees — fixed forever.
In reality:
- CGTMSE fees do not change every year
- But they do get revised periodically
- Revision depends on credit conditions, government policy, and MSME lending priorities
CGTMSE Renewal Fee vs MSME Renewal Fee — Why Borrowers Get Confused
Banks often use terms casually, and entrepreneurs misunderstand them.
Two commonly mixed-up terms:
❌ MSME Renewal Fee:
Refers to renewal of Udyam/MSME Registration.
✔ CGTMSE Renewal Fee:
Continuation of the Annual Guarantee Fee for the loan.
📌 Both are not the same, and only the second term affects the loan.
CGTMSE Fee Calculation — Real Loan Example
Let’s take a real MSME scenario:
Loan sanctioned: ₹30,00,000
Fee slab: 0.55% per annum
Year 1 (on sanctioned amount)
0.55% of 30,00,000 = ₹16,500
Year 2 (outstanding becomes ₹24,00,000)
0.55% of 24,00,000 = ₹13,200
This continues until repayment.
Historical Trends — When Were CGTMSE Fees the Highest?
From around 2019 to 2023, CGTMSE fees were at their peak:
| Period | Fee Range |
|---|---|
| 2019–2023 | 0.75% to 1.20% |
| 2024 | Reduced |
| 2025 | Lowest in decade |
Earlier fee slabs penalized smaller loans more — which defeated the purpose of MSME inclusion.
The 2025 structure reverses that logic — making small loans cheapest.
This is a major credit policy shift and an incentive for micro-entrepreneurs.
Why CGTMSE Fees Are Low Today (Policy Logic)
The government is aggressively pushing MSME credit due to:
✔ Self-employment growth
✔ Formalization push
✔ Startup financing gap
✔ Manufacturing & services expansion
✔ Global supply chain shifts
✔ “Make in India” policy
Lower CGTMSE fees make collateral-free lending economically attractive for both sides:
- Banks → Risk protected
- MSMEs → Affordable access
Is Paying CGTMSE Fees Worth It? (Practical Answer)
Consider two options:
Option A: Pay CGTMSE fees (₹10,000–30,000 per year)
Option B: Mortgage property for loan security (₹40–50 lakh property valuation)
For most early-stage entrepreneurs, the math is obvious — CGTMSE fee is far cheaper, faster, and safer.
Official Sources & References (Clickable)
✔ CGTMSE Official Website
https://www.cgtmse.in
✔ CGTMSE Fee Structure
https://www.cgtmse.in/Home/VS/47
✔ CGTMSE Circulars
https://www.cgtmse.in/Home/Circulars
✔ Udyam/MSME Registration (Renewal Context)
https://udyamregistration.gov.in
Frequently Asked Questions (FAQ)
Q1. Do CGTMSE fees affect loan interest?
No. They are separate.
Q2. Are fees refundable if loan is closed early?
No.
Q3. Does every MSME loan come under CGTMSE?
No. Banks decide eligibility.
Q4. Do fees stop after foreclosure?
Yes. Next year fee is not charged.
Q5. Is CGTMSE available for startups?
Yes, if bank approves.
About the Author — BusinessZindagi.com
Tab writes about MSMEs, entrepreneurship, self-employment and small business finance in India. His mission is to simplify business concepts for first-generation entrepreneurs and practical doers.
Disclaimer
This article is for educational purposes. Policies, fees, and CGTMSE circulars may change. Always cross-check with your bank and visit the official CGTMSE website.
AI Disclaimer
Parts of this article were generated with AI support and manually verified using official sources and human editing for accuracy, clarity, and compliance.
