Mudra, CGTMSE and PMEGP: Top Government Schemes for Small Businesses Explained (2026)

Last updated: October 2026

Most small business owners hear three scheme names again and again: Mudra, CGTMSE and PMEGP. They are not the same thing. Here is the easiest way to understand them:

• Mudra = a small loan without security
• CGTMSE = a government guarantee, so the bank doesn't ask for your property
• PMEGP = free money (subsidy) towards starting a new business

Side-by-Side Comparison MudraCGTMSEPMEGP What it isLoanGuarantee on a bank loanSubsidy + bank loan Maximum₹20 lakh₹10 croreProject ₹50 lakh (mfg), ₹20 lakh (service) Security needed?NoNoNo (with CGTMSE cover) Free money?NoNoYes, 15–35% New business?YesYesOnly new Existing business?YesYesNo (except upgrade loan)

1. Mudra Loan (PM Mudra Yojana)

A loan for small non-farm businesses: shops, workshops, services, food units and also dairy, poultry and similar activities. No property or guarantor is needed.

TypeAmount ShishuUp to ₹50,000 Kishore₹50,000 to ₹5 lakh Tarun₹5 lakh to ₹10 lakh Tarun Plus₹10 lakh to ₹20 lakh, only if you have already taken and fully repaid a Tarun loan

Apply at: any bank, small finance bank or NBFC, or online at jansamarth.in. Each lender sets its own interest rate.

2. CGTMSE (Loans Without Collateral)

Banks usually ask for property as security. Under CGTMSE, a government-backed trust promises the bank that it will cover most of the loss if you can't repay. So the bank lends without asking for your property.

• Up to ₹10 crore per business (raised from ₹5 crore from April 2025)
• Covers both machinery loans and working capital
• For micro and small businesses, including shops and traders
• A small yearly guarantee fee applies (starting around 0.37% for small loans). The bank may pass it on to you.

How to use it: You don't apply separately. Just ask your bank: "Please sanction my loan under CGTMSE cover."

3. PMEGP (Subsidy for a New Business)

Under PMEGP, the government pays part of your project cost, and you don't return that part. The bank gives a loan for the rest.

You areYou put inSubsidy in citySubsidy in village General category10%15%25% Women, SC/ST, OBC, minority, ex-servicemen, disabled, NE/hill/border areas5%25%35%

Simple example: A woman starts a ₹10 lakh business in a village. She puts in ₹50,000, the government gives ₹3.5 lakh as subsidy, and the bank lends ₹6 lakh.

Key rules:

• Project cost up to ₹50 lakh (manufacturing) or ₹20 lakh (service)
• Only for new businesses
• 8th pass needed for bigger projects (above ₹10 lakh mfg / ₹5 lakh service)
• A short entrepreneurship training (EDP) is compulsory
• Apply at kviconline.gov.in/pmegpeportal

Which One Should You Choose?

• Need a small amount quickly: Mudra
• Starting a new unit and want a subsidy: PMEGP
• Running business, need a bigger loan, no property to pledge: bank loan under CGTMSE

First step for all three: get your free Udyam registration.

Common Questions

Do I have to repay a Mudra loan?

Yes. It is a loan, not a grant. Only the PMEGP subsidy part is not repaid.

Can PMEGP and CGTMSE be used together?

Yes. Banks usually cover PMEGP loans under CGTMSE, so no security is needed.

Are there state schemes too?

Yes. Most states give their own subsidies on capital, interest or electricity for MSMEs. Ask your District Industries Centre (DIC).

Should I pay an agent to get these loans?

No. Apply directly at the bank or on official portals. Be careful of anyone asking for money upfront.

Disclaimer: General information only. Scheme limits and rules change; confirm with your bank or the official portal before applying.