NITI Aayog Report: Reforming CGTMSE to Lift MSME Competitiveness
Why in the news
A NITI Aayog study urged an overhaul of small-business credit guarantees and a focus on how credit is used, not only obtained.
Key facts
- India has over 6 crore MSMEs, with a huge credit gap (tens of lakh crore rupees), little formalisation and poor technology adoption.
- Weak governance and costly premiums for the tiniest borrowers draw criticism.
Recommendations
| Area | Suggestion |
|---|---|
| Oversight | Place the Trust under a formal regulator |
| Cost | Reduce premiums for micro and small units |
| Women-led units | 100 per cent guarantee cover |
| Credit use | Stress utilisation, better allocation and risk support |
| Technology | Funding and infrastructure aid for AI adoption, citing a NASSCOM-Meta study |
| Sectors | Textiles, chemicals, auto components, food processing and clusters |
About CGTMSE
- Offers collateral-free guarantees on loans by banks and NBFCs to micro and small enterprises; lenders pay an annual fee.
- Typical cover is 75 per cent, higher for tiny loans, women, SC/ST entrepreneurs, the North East and aspirational districts.
- The ceiling went up to Rs 5 crore in 2023 following a Rs 9,000 crore corpus infusion, and the 2025-26 Budget extended micro and small enterprise cover to Rs 10 crore.
Significance
A reformed scheme could serve women, first-generation and rural entrepreneurs and cheapen small-ticket loans.
Exam angle
- Guarantee fund: CGTMSE, 2000, with SIDBI.
- 2025 micro definition: investment up to Rs 2.5 crore, turnover up to Rs 10 crore.