CGTMSE Guarantee Fee 2026: Annual Fee Rates, Risk Premium, Worked Rupee Examples and Who Actually Pays

Manjeet owns a small packaging unit in Rajpura. He needed a Rs.10 lakh term loan for a sealing machine and had no property to pledge. The bank said the loan could go under CGTMSE cover, so no collateral would be needed, but "there will be a guarantee fee."

"How much?" he asked.

The officer said, "Around 0.75 percent."

That night Manjeet searched the internet. One page said 0.37%. Another said 0.75%. A third said 1% plus something. A friend told him, "It is deducted from your loan and you never see it." Another friend said the bank pays it and you pay nothing. By midnight he had four answers and no idea whether the fee would cost him Rs.3,700 or Rs.7,500 or something else.

He was not wrong to be confused. The official CGTMSE page itself lists one set of rates in a table and uses a different base rate in its worked examples. This guide lays out what the published material says, shows both sets of numbers in rupees, explains the risk premium and the concessions, and tells you what to ask your bank so that you leave with one clear figure in writing.

(This story is fictional. Names, places and amounts are examples only.)

QUICK ANSWER

The CGTMSE guarantee fee is mainly an Annual Guarantee Fee (AGF), charged as a percentage of the outstanding loan, and it depends on the loan slab and a risk premium that the CGTMSE system assigns to the lender. The table published on the CGTMSE site shows a standard rate of 0.37% for loans up to Rs.10 lakh, 0.55% above Rs.10 lakh to Rs.50 lakh, 0.60% above Rs.50 lakh to Rs.1 crore, 1.20% above Rs.1 crore to Rs.2 crore and 1.35% above Rs.2 crore to Rs.5 crore, with higher rates when a risk premium applies. The same page uses 0.75% as the base in its worked examples, so the figures do not agree. Ask your lender for the exact rate applied to your account, in writing, and check cgtmse.in before you accept it.

1. What CGTMSE is and why there is a fee

CGTMSE stands for the Credit Guarantee Fund Trust for Micro and Small Enterprises. It exists so that banks can lend to small businesses without asking for property as collateral. When a loan is covered, the trust gives the lender a guarantee against a part of the loss if the borrower defaults. In return the trust charges a fee.

A guarantee is a kind of insurance for the lender, and insurance has a price. That price is what people call the CGTMSE guarantee fee. It is not a charge by the government on the borrower for a licence or a registration. It is a cost linked to the loan, and who ultimately bears it depends on the lender's practice, which we cover later.

For a small borrower the CGTMSE guarantee fee matters in one way: it is a recurring cost on top of interest. A fee of 0.37% or 0.75% sounds trivial, but on a large, multi-year loan it adds up, and it should be in your cost calculation from day one.

2. The annual guarantee fee: how it works

According to the CGTMSE page on annual guarantee fee, the fee under the circular referred to there as Circular 139 of 2017-18 is charged on the outstanding amount of the facility, not on the guaranteed amount, for facilities sanctioned or renewed to micro and small enterprises on or after 1 April 2018. The same page refers to later circulars, including one issued on 3 January 2022 and another that made risk premium reports available in the CGTMSE system from 1 December 2022.

Put simply, the fee is a yearly percentage applied to what you still owe. As you repay the loan, the amount you owe falls, and so does the fee in rupees. This is why the first-year fee is the highest and the last-year fee is the lowest on a term loan.

The rate is not the same for every borrower. It depends on three things:

• The size of the loan, because the published table has different slabs.
• A risk premium, which the CGTMSE system works out for the lending institution.
• Any concession for which the borrower or the area qualifies.

3. Published rate slabs

The CGTMSE annual guarantee fee page reproduces a table of rates from a circular numbered 221. It does not state an effective date for this table, so please confirm on the site whether it is the current one before you rely on it. The table is given below exactly as published, in percent per year.

Table 1: AGF rates as published on the CGTMSE page (percent per year)

The page itself puts an asterisk after the words "Standard Rate" but does not print a footnote, so we cannot tell you what the asterisk refers to. Treat that as another reason to ask your lender for the rate they actually applied.

For the slabs, notice the jump. Moving from the Rs.50 lakh to 1 crore slab to the Rs.1 crore to 2 crore slab doubles the standard rate from 0.60% to 1.20%. If you are borrowing around Rs.1 crore, the exact sanctioned amount can change your fee a lot, so ask whether a slightly smaller limit would fall in a cheaper slab.

4. The inconsistency you should know about

This is the part most websites skip. The same CGTMSE page contains question-and-answer examples taken from a different circular, Circular 208, and those examples use a base rate of 0.75% for a Rs.10 lakh guarantee, not the 0.37% in the table.

Here is what the examples say for a Rs.10 lakh guarantee, as the page prints them:

• Risk premium of 15%: 0.86%.
• A 10% discount: 0.68%.
• Risk premium of 15% together with a 10% concession for women: 0.78%, shown as 0.75 x 1.15 x 0.90.
• Risk premium of 50% with a 20% concession for an aspirational district or ZED: 0.90%, shown as 0.75 x 1.50 x 0.80.
• Risk premium of 30% with a 30% concession (aspirational district, SC/ST, ZED): 0.68%.

Put these next to the table and the differences are plain. The table says a 15% risk premium on the Rs.10 lakh slab gives 0.43%. The example says 0.86%, which is exactly double. The table's 10% discount gives 0.33%, and the example gives 0.68%. Another example on the page, for a larger total exposure, gives 1.27% without showing a method, and one example's heading says 30% risk premium while the line under it says 50%.

I am not able to tell you from the page which one the lender will apply today. The page shows older and newer circulars mixed together. What I can tell you is the method: standard rate multiplied by one plus the risk premium, then multiplied by one minus any concession. The base is where the confusion lies.

So the sensible way to plan is to compute both. If your bank's number lands between the two, that is no surprise. If it falls far outside, ask why.

5. Risk premium and concessions

The risk premium is an extra percentage added to the standard rate for lenders whose past guarantee claims have been higher. It is calculated by the CGTMSE system and reported to the lending institution, so it comes from the bank's own track record, not from your personal profile. That means two borrowers with identical businesses can face different fees if they use different banks.

Concessions work the other way. The examples on the page show concessions of 10% for certain categories, 10% for women, and 20% or 30% in some cases, such as borrowers in aspirational districts, SC/ST borrowers or ZED-certified enterprises. The percentages and the categories that qualify have changed over the years, and the page does not give a single clean list. Ask the bank whether any concession applies to you, and ask them to show it in the sanction paper.

The formula in the page's own examples is:

Fee % = base rate x (1 + risk premium) x (1 - concession)

Table 2: The fee formula applied (illustration using both bases)

The 0.78% and 0.90% rows match the page's own examples. The 0.37 base rows are our arithmetic on the same formula and are shown only to let you see the difference the base makes. They are udaharan, not published results.

6. Worked examples in rupees

Percentages hide the real cost of the CGTMSE guarantee fee. Here is the fee in rupees for common loan sizes, using the standard rate with no premium or concession. The fee is charged on the outstanding balance, so these are first-year numbers on the full sanctioned amount.

Table 3: First-year fee on the full amount (udaharan, standard rate, no premium)

For a Rs.10 lakh term loan at 11% over 60 months, the EMI is Rs.21,742. Because the fee follows the falling balance, it shrinks each year. This table shows the yearly fee on the balance at the start of each year.

Table 4: Fee over five years on a Rs.10 lakh loan, 11%, 60 months (udaharan)

So on a Rs.10 lakh loan the CGTMSE annual guarantee fee over five years is somewhere between about Rs.11,900 and Rs.24,100 depending on which base the lender uses, before any risk premium or concession. That is roughly Rs.200 to Rs.400 a month. It is real money, but compare it with what collateral-free access is worth. If you had to pledge property, you might not get the loan at all, or you might pay for valuation, legal opinion and registration of the mortgage. Weigh it that way.

7. Who pays the fee

The guarantee fee is charged to the lending institution by the trust. What happens next depends on the lender. Some lenders add the fee to the borrower's charges, some collect it as a separate item at sanction or yearly, and some absorb part of it. The CGTMSE page does not decide this for you, and I did not find a single rule that applies to all banks.

This is why the same loan can look different at two banks. One bank may quote 10.5% interest and charge you the guarantee fee separately. Another may quote 11% and absorb the fee. Compare the all-in cost, not just the interest rate.

Table 5: What to compare between two offers (udaharan)

Work out the total yourself: EMI x 60 + processing fee + guarantee fee. Bank A: Rs.21,494 x 60 = Rs.12,89,634, plus Rs.10,000 and Rs.12,000 = Rs.13,11,634. Bank B: Rs.21,742 x 60 = Rs.13,04,520, plus Rs.5,000 = Rs.13,09,520. The "cheaper" interest rate at Bank A ends up costing about Rs.2,000 more. These are udaharan numbers and your offers will differ, but the habit of adding everything up is worth keeping.

8. What the fee means for your EMI and DSCR

If the fee is passed to you, treat it as part of your annual cost when you calculate DSCR. DSCR here is annual operating profit before loan payments divided by annual debt service. The fee is not part of the EMI, so add it to the yearly outgo to be safe.

On the Rs.10 lakh loan above, the yearly EMI total is Rs.2,60,904 (Rs.21,742 x 12). Add a first-year fee of Rs.7,500, the higher figure, and the outgo is Rs.2,68,404.

Table 6: DSCR with and without the fee, year 1 (udaharan)

The fee moves DSCR by about 0.03 to 0.04 in this example. It will not make or break a decent business, but it can tip a thin one, so build it into the project report instead of discovering it at sanction.

9. CGTMSE and Mudra: the common confusion

Many Mudra borrowers ask about the CGTMSE fee for a Mudra loan because both schemes talk about collateral-free loans. They are not the same thing. PMMY loans have their own credit guarantee arrangement for micro units, which MUDRA describes as the Credit Guarantee Fund for Micro Units, or CGFMU. CGTMSE is the guarantee trust for micro and small enterprise loans more generally.

So if you take a Mudra loan, do not assume that the CGTMSE table above is what you will be charged. Ask your lender two direct questions: is my loan covered under any guarantee scheme, and what fee, if any, is charged to me. I have not verified how guarantee fees are applied to Mudra loans at individual banks, and I would rather say that than guess.

On collateral-free limits, secondary reports say the RBI raised the collateral-free limit for loans to micro and small enterprises to Rs.20 lakh from 1 April 2026. Confirm the current limit and the circular with your bank, as I read this only in secondary coverage.

10. Questions to ask your bank

Table 7: Questions that get you a clear number

Do not accept "around 0.75%" as an answer. Ask for the rate, the amount in rupees and the date, in writing.

11. Step-by-step: before you accept a CGTMSE-covered loan

Step 1: Ask the bank whether the loan will be covered by CGTMSE, CGFMU or no guarantee at all. Step 2: Ask for the AGF rate, the risk premium and any concession applied to your account. Step 3: Open the AGF page on cgtmse.in and compare the rate with the published table. Step 4: Calculate the fee in rupees for year 1 using your sanctioned amount. Step 5: Ask whether the fee is charged to you and when. Step 6: Add the fee to your project report as a yearly cost. Step 7: Check that your DSCR still works with the fee included. Step 8: Compare the all-in cost of at least two offers, including processing fee and guarantee fee. Step 9: Pay the fee only to the bank by a traceable method and keep the receipt. Step 10: Never pay anyone outside the bank who offers to "arrange CGTMSE cover" for a fee.

Rejection Ke Udaharan: Bank Ne Kya Kaha Aur Fix Kya Hai

Case 1: Manjeet, 43, Rajpura

What happened: He accepted "around 0.75%" without asking for details and was later surprised by a yearly debit.

What the bank said: "The guarantee fee is charged every year on the outstanding amount."

Exact fix: He asked for a written fee schedule, entered the yearly fee in his budget and confirmed that the amount falls as the loan is repaid.

Case 2: Shabana, 36, Hyderabad

What happened: She did not know a woman borrower concession might apply and paid the full rate.

What the bank said: "No concession was applied."

Exact fix: She asked the branch to check eligibility for any concession, and requested the working in writing.

Case 3: Vivek, 49, Surat

What happened: He asked for Rs.1.05 crore and fell into the Rs.1 crore to 2 crore slab, where the standard rate is double.

What the bank said: "Your limit crosses the slab."

Exact fix: He reduced the term loan to Rs.98 lakh by using his own funds for a part of the cost, which brought the request into a cheaper slab, and showed the revised means of finance.

Case 4: Rekha, 33, Bhopal

What happened: She applied for a Mudra loan and quoted the CGTMSE table to the officer.

What the bank said: "Your loan is under a different guarantee arrangement."

Exact fix: She asked which guarantee applied and what, if anything, was charged to her.

Case 5: Ajay, 40, Chandigarh

What happened: A "consultant" asked for Rs.8,000 to "arrange CGTMSE approval".

What the bank said: "We do not use agents. CGTMSE cover is arranged by the lender."

Exact fix: He refused to pay, reported the consultant at cybercrime.gov.in and applied directly at the branch.

Fraud Se Kaise Bachein

CGTMSE cover is arranged between your lender and the trust. Borrowers do not buy it from agents or pay a "CGTMSE registration fee" to a consultant. Be careful with websites that look like the official one and ask for fees or personal details. The PIB Fact Check unit has flagged fake Mudra approval letters asking for fees such as Rs.350 (12 July 2026), Rs.6,550 (21 June 2026) and Rs.7,699 (March 2026). The same trick is easy to adapt to "guarantee fee" claims.

• Mudra does not appoint any agent or middleman.
• Approval never comes through WhatsApp or social media.
• Loans are given only by banks, NBFCs and MFIs, and no advance fee is charged for approval.
• Anyone asking for money as a "subsidy", "processing" or "loan release" fee is running a fraud.

What to do:

• Do not send money.
• Do not share OTP, Aadhaar or bank details.
• Verify at the branch in person.
• Report at cybercrime.gov.in or call 1930.

Full guide: https://mudraready.in/blog/mudra-loan-fraud-fake-call-whatsapp

Myths vs Facts

Myth 1: The CGTMSE fee is a one-time charge of 0.75%.

Fact 1: The annual guarantee fee is charged on the outstanding amount each year. The percentage depends on the slab, the risk premium and any concession, and the published page itself uses two different base rates.

Myth 2: The fee is the same at every bank.

Fact 2: The risk premium is linked to the lending institution, so the rate can differ between lenders. How much of it is passed to you also differs.

Myth 3: You must pay the fee to an agent to get CGTMSE cover.

Fact 3: Cover is arranged by the lender. You pay nothing to any outside agent.

Myth 4: A bigger loan always costs the same percentage.

Fact 4: The published table has slabs, and the rate rises at higher slabs. It doubles from the Rs.50 lakh to 1 crore slab to the next one.

Myth 5: The CGTMSE table applies to all Mudra loans.

Fact 5: Mudra loans have their own guarantee arrangement. Ask your lender what applies.

Myth 6: The guarantee fee is a government tax on borrowers.

Fact 6: It is the price the trust charges for guaranteeing a part of the loan. Whether the lender passes it on is the lender's decision.

FAQs

What is the CGTMSE guarantee fee?

It is the fee the trust charges for guaranteeing a part of your collateral-free loan. The main charge is an annual guarantee fee, calculated as a percentage of the outstanding loan amount. The percentage depends on the loan slab, a risk premium for the lender and any concession that applies to you.

What is the AGF rate for a loan up to Rs.10 lakh?

The table on the CGTMSE page shows a standard rate of 0.37% for loans up to Rs.10 lakh, with higher rates when a risk premium applies. The same page uses 0.75% as the base in its worked examples, so confirm the rate your bank applies and ask for it in writing.

Is the fee charged on the loan amount or the outstanding balance?

The CGTMSE page says the fee is charged on the outstanding amount for facilities sanctioned or renewed to micro and small enterprises on or after 1 April 2018. As you repay, the outstanding falls, so the yearly fee in rupees also falls.

Who pays the CGTMSE guarantee fee, the bank or the borrower?

The trust charges the lender. Many lenders recover it from the borrower in some form, but practice varies, and some absorb part of it. Ask your bank whether you will be charged, how much and when, and compare the full cost across offers.

What is the risk premium in CGTMSE?

It is an extra percentage added to the standard fee for lenders whose past guarantee claims have been higher. The CGTMSE system works it out and reports it to the lending institution. It is therefore tied to the lender, so the same loan can carry different fees at different banks.

Are there concessions in the CGTMSE fee?

The CGTMSE page shows examples of concessions of 10%, 20% and 30% for categories such as women, aspirational districts, SC/ST borrowers and ZED-certified enterprises. The list and percentages have changed over time, so ask your lender to confirm what applies to you and show it in writing.

Is the CGTMSE fee applicable to Mudra loans?

Not necessarily. PMMY loans have their own guarantee arrangement for micro units, called CGFMU by MUDRA. I have not verified how fees apply at individual banks, so ask your lender which guarantee covers your loan and whether any fee is charged to you.

Does the guarantee fee affect my EMI?

The fee is not part of the EMI formula, but if the bank charges it to you, it adds to your yearly cost. On a Rs.10 lakh loan, the first-year fee may be about Rs.3,700 to Rs.7,500 before premiums. Include it in your project report so your DSCR is realistic.

Can I pay a consultant to arrange CGTMSE cover?

No. Cover is arranged by your lender with the trust, and you do not need an outside agent. Anyone charging you a fee to arrange cover, or to guarantee approval, is a fraud risk. Report such offers at cybercrime.gov.in or call 1930.

How can I check the current CGTMSE fee?

Open the annual guarantee fee page on cgtmse.in and compare the table with what your bank quotes. Because the published page mixes circulars and uses different base rates, also ask your lender to write down the rate, the risk premium, any concession and the first-year fee in rupees.

Conclusion

The CGTMSE guarantee fee is small compared with what collateral-free credit is worth, but it is not zero, and it is not as simple as one percentage. It is an annual charge on the outstanding balance. It changes with slab, with the lender's risk premium and with concessions. And the official page itself shows two base rates, 0.37% in the table and 0.75% in the examples.

Manjeet's midnight confusion had an easy cure. On a Rs.10 lakh loan, the five-year fee works out to roughly Rs.11,900 at one base and Rs.24,100 at the other, before any premium or concession. Once he knew the range, he asked his bank for the exact rate in writing, found it was in the middle, added about Rs.4,500 a year to his cost sheet and checked that his DSCR still held. The sealing machine paid for itself, and nothing surprised him at the yearly debit.

Your steps are the same: ask which guarantee covers you, get the rate and the rupee amount in writing, compare the all-in cost of two offers, and keep the fee in your project report.

If you want that report ready for the bank, with cost, income, EMI and DSCR laid out and room for the guarantee fee, MudraReady generates it. Your first report is free, and after that each report is Rs.499.

Generate your report: https://mudraready.in/generate-your-mudra-report

More to read: https://mudraready.in/blog/mudra-loan-eligibility-english | https://mudraready.in/blog/mudra-loan-documents-list-hindi | https://mudraready.in/blog/why-banks-reject-mudra-loans

Sources

• CGTMSE, Annual Guarantee Fee page (rate table from Circular 221; Q&A examples from Circular 208; Circular 139 and 190 references): https://cgtmse.in/Home/VS/98
• CGTMSE official site: https://cgtmse.in
• MUDRA official (scheme tiers, guarantee arrangement, lending institutions): https://www.mudra.org.in
• RBI collateral-free limit of Rs.20 lakh from 1 April 2026 (secondary reports of RBI/2025-26/206; confirm with the RBI circular or your bank): https://www.rbi.org.in
• PIB Fact Check, fake Mudra letter (Rs.6,550 fee, 21 June 2026): https://newsonair.gov.in/pib-fact-check-debunks-fake-claim-on-pradhan-mantri-mudra-yojana/
• PIB Fact Check, fake Mudra letter (Rs.350 fee, 12 July 2026): https://newsonair.gov.in/govt-debunks-fake-approval-letter-claiming-to-grant-loan-under-pmmy-on-payment-of-rs-350-as-processing-fee/
• Fake Mudra Rs.3 lakh loan offer alert (Rs.7,699 fee, March 2026): https://www.angelone.in/news/personal-finance/pm-mudra-loan-scam-alert-pib-fact-check-flags-fake-3-lakh-loan-offer
• Cyber crime reporting: https://cybercrime.gov.in

Disclaimer

This information is for education only. Loan approval depends on the lender's policy, your repayment capacity and your documents. MudraReady does not give loans and does not guarantee approval. Scheme rules can change, so confirm with your bank or the official website.

Last Updated: October 2026