CGTMSE vs Mudra Loan: Which Scheme Fits Your Business?
A Mudra loan is a bank, NBFC or MFI loan of up to ₹20 lakh for a non-corporate, non-farm small or micro enterprise. CGTMSE is a guarantee that lets a bank lend a Udyam-registered micro or small enterprise up to ₹10 crore without collateral. The two never cover the same loan. Credit Core Finance arranges CGTMSE-backed facilities from ₹1 crore.
What is a Mudra loan?
Mudra loans are given under the Pradhan Mantri Mudra Yojana (PMMY). MUDRA itself, the Micro Units Development and Refinance Agency Ltd, is a refinancing institution. In its own words, "MUDRA does not lend directly to the micro entrepreneurs / individuals".
You apply at a bank, a small finance bank, an NBFC or a microfinance institution. That lender sanctions the loan, pays it out and collects the repayments. MUDRA refinances the lender behind the scenes. MUDRA is not an office you can walk into; your lender is.
Important: Because MUDRA never lends directly, no genuine Mudra sanction arrives as a letter asking you to pay an advance charge to release the money.
Treat any such letter as fraud.
Loan bands under PMMY
| Band | Loan amount |
|---|---|
| Shishu | Up to ₹50,000 |
| Kishore | Above ₹50,000, up to ₹5 lakh |
| Tarun | Above ₹5 lakh, up to ₹10 lakh |
| Tarun Plus | Above ₹10 lakh, up to ₹20 lakh |
Tarun Plus was added by Gazette notification S.O. 4658(E) dated 24-Oct-2024, effective from that date. It is open only to a borrower who has availed a Tarun loan and repaid it successfully.
A first Mudra loan therefore stops at ₹10 lakh.
What a Mudra loan can be used for
The published purpose is income-generating activity in manufacturing, trading and services, including activities allied to agriculture.
Who is eligible for a Mudra loan?
The official eligibility line is wider than most summaries suggest: non-corporate, non-farm small and micro enterprises.
It is not limited to enterprises classified as micro under the MSMED Act. Summaries that narrow Mudra to MSMED-classified micro enterprises are therefore incomplete.
Your lender applies its own credit checks on top of this eligibility line before sanctioning the facility.
The guarantee behind a Mudra loan
Mudra loans are covered by the Credit Guarantee Fund for Micro Units (CGFMU), administered by the National Credit Guarantee Trustee Company (NCGTC).
The cover works at portfolio level. It protects the lender's Mudra portfolio as a whole rather than each loan individually.
Remember: The guarantee protects the lender. You still remain responsible for repaying the full Mudra loan.
What is a CGTMSE loan?
CGTMSE, the Credit Guarantee Fund Trust for Micro and Small Enterprises, was set up by the Ministry of MSME and SIDBI. It does not lend either.
Under its Credit Guarantee Scheme (CGS-I), it guarantees collateral-free credit that a member bank or financial institution extends to a Udyam-registered micro or small enterprise.
If the borrower defaults, the Trust pays the lender the covered share of the amount in default. The borrower remains liable for the whole loan.
The ₹10 crore figure is a ceiling, not an entitlement. The bank still appraises the business and decides the actual facility limit.
Fund-based limits and non-fund-based limits such as letters of credit and bank guarantees can both be covered.
The lender takes primary security, usually hypothecation of stock and book debts, but no collateral property and no third-party guarantee for the covered portion.
Where the lender takes partial collateral, the guarantee covers only the unsecured part. A fully collateralised facility cannot be covered.
For the detailed rules, circular numbers and effective dates, read our CGTMSE scheme guide.
CGTMSE vs Mudra: side by side
| Point | Mudra loan (PMMY) | CGTMSE-backed loan |
|---|---|---|
| Who lends | A bank, small finance bank, NBFC or MFI. MUDRA refinances the lender. | A member bank or financial institution. CGTMSE guarantees the lender. |
| Loan size | Up to ₹20 lakh under Tarun Plus, for repeat Tarun borrowers only. A first Mudra loan stops at ₹10 lakh. | Up to ₹10 crore per borrower at banks (Circular 250/2024-25, effective 01-Apr-2025). |
| Borrower | Non-corporate, non-farm small and micro enterprises. | Udyam-registered micro and small enterprises. Medium enterprises are excluded. |
| Activities | Manufacturing, trading, services and allied agriculture. Crop loans and land improvement are excluded. | Manufacturing, services, retail trade and wholesale trade. |
| Collateral | None. | None for the covered portion. Primary security on stock and book debts applies. |
| Guarantee | CGFMU under NCGTC, at portfolio level. | CGTMSE under CGS-I, at loan level. 75% standard, with higher bands for notified categories. |
| Legal basis | PMMY. Gazette S.O. 4658(E) dated 24-Oct-2024 for Tarun Plus. | CGS-I scheme document. Circular 250/2024-25 for the ₹10 crore ceiling. |
| Which fits you | Up to ₹20 lakh: a Mudra loan at your lender. | ₹1 crore to ₹10 crore: a CGTMSE-backed limit, which is the work Credit Core Finance does. |
Can a Mudra loan and CGTMSE cover the same loan?
No.
Clause 5(iii) of the CGS-I scheme document says a credit facility is not eligible for CGTMSE cover if it "has been covered for guarantee through NCGTC Ltd."
CGFMU, the guarantee behind every Mudra loan, is administered by NCGTC. So a loan guaranteed under CGFMU cannot also be guaranteed under CGTMSE.
The distinction is at facility level. It is the specific loan that cannot carry both guarantees, not the borrower.
What happens when you need more than ₹20 lakh?
PMMY ends at ₹20 lakh. Neither the PMMY material nor the CGTMSE scheme document sets out a route that automatically moves a Mudra borrower up into a CGTMSE-backed limit.
The sources are silent on this, and this page does not fill that gap.
What happens in practice is a fresh application. A business that needs more than ₹20 lakh applies to a lender for a new facility.
Before you file for a CGTMSE-backed limit, read why CGTMSE loan applications get rejected .
Which scheme should you choose?
How Credit Core Finance works on CGTMSE files
We arrange CGTMSE-backed facilities from ₹1 crore up to the ₹10 crore ceiling for micro and small enterprises in Pune and across Maharashtra.
Every file is appraised the way a bank's credit desk will read it before it is logged in.
We do not promise approval and we do not charge an advance fee.
Banks advertise. Brokers claim. CCF grades.
Talk to us about structuring a CGTMSE-backed facility for your business.
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Frequently Asked Questions
Is a Mudra loan the same as a CGTMSE loan?
No. A Mudra loan is a loan of up to ₹20 lakh under PMMY, given by a bank, NBFC or MFI and guaranteed at portfolio level under CGFMU. CGTMSE is a loan-level guarantee on collateral-free bank credit of up to ₹10 crore to a Udyam-registered micro or small enterprise. The lender decides which product fits your file.
What is the maximum Mudra loan amount?
₹20 lakh, under the Tarun Plus band introduced by Gazette S.O. 4658(E) dated 24-Oct-2024. Tarun Plus is only for a borrower who has availed a Tarun loan and repaid it successfully. A first Mudra loan is capped at ₹10 lakh.
Can a trader get a CGTMSE-backed loan?
Yes. Retail and wholesale trade are eligible under CGS-I on the same terms as manufacturing and services (Circular 210/2022-23). The enterprise must be Udyam-registered as micro or small.
Can I move from a Mudra loan to a CGTMSE loan?
No published rule provides a graduation route. You apply afresh to a lender for a new facility, which the lender appraises on your financials, banking and bureau record, with the Mudra loan counted among your obligations. If the new facility is placed under CGTMSE, the cover applies to that facility only.
Does MUDRA give loans directly?
No. MUDRA is a refinancing institution and does not lend to entrepreneurs or individuals. Mudra loans come from banks, small finance banks, NBFCs and MFIs, which MUDRA refinances. A letter that offers a Mudra loan against an advance charge is not from MUDRA.
Does Credit Core Finance arrange Mudra loans?
No. Our CGTMSE work starts at ₹1 crore and runs to the ₹10 crore ceiling. Below ₹1 crore, approach your bank or NBFC directly.
Questions about funding for your business?