CGTMSE, Mudra, Stand-Up India, PMEGP — the four schemes that fund Indian MSMEs without collateral, and how to actually qualify.
Indian banks lent over ₹23 lakh crore to MSMEs in FY 2024–25. A large share of it was under four flagship collateral-free schemes — CGTMSE, Mudra, Stand-Up India and PMEGP. Most founders have heard of one or two; almost none know how to actually stack them. This is the practical playbook.
The Credit Guarantee Fund Trust for Micro and Small Enterprises guarantees up to 85% of the loan, so banks lend without collateral. Loan size: up to ₹5 Cr (raised in 2023). Best for working capital, equipment finance, project loans.
Pradhan Mantri Mudra Yojana finances non-corporate, non-farm small businesses up to ₹20 lakh (Tarun Plus tier, raised in 2024).
| Tier | Loan size |
|---|---|
| Shishu | Up to ₹50,000 |
| Kishore | ₹50,001 – ₹5 lakh |
| Tarun | ₹5 lakh – ₹10 lakh |
| Tarun Plus | ₹10 lakh – ₹20 lakh |
Mudra loans don't require collateral or a guarantee fee. They're issued by banks, SFBs, NBFCs and MFIs.
Loans from ₹10 lakh to ₹1 crore for greenfield enterprises in manufacturing, services or trading. At least one woman or SC/ST entrepreneur must hold 51%+ in non-individual entities.
Prime Minister's Employment Generation Programme provides a margin money subsidy of 15–35% on projects up to ₹50 lakh (manufacturing) and ₹20 lakh (services).
Banks reject more applications for weak project reports than for any other reason. A strong report includes:
Pre-loan, clean up your books. Match GSTR-3B turnover with bank credits with ITR turnover. A 5% variance is acceptable. Anything more raises questions you don't want to answer in front of a credit officer.
A small manufacturer can layer them: PMEGP for the equipment subsidy → CGTMSE-backed term loan for the balance project cost → Mudra Tarun Plus for working capital → TReDS for invoice discounting. Done right, you reduce blended cost of capital by 200–400 bps versus a single conventional loan.
Collateral-free credit isn't a favour — it's a structured product the government designed for businesses that meet defined criteria. Get your Udyam, clean your books, write a credible project report, and you'll find banks competing for your business. Treat it as a process, not a pitch.
Senior contributor at Taxpex Consultancy. Reviewed by a practising Chartered Accountant. Published on 18 February 2026 · Updated on 18 February 2026.
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Yes — up to 60% withdrawal at maturity is tax-free. The remaining 40% must buy an annuity; pension income is then taxed at slab.
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