CGTMSE was set up in 2000 by Ministry of Micro, Small and Medium Enterprises, Government of India (GoI) and SIDBI with an initial committed corpus of INR 2500 crore which got augmented to INR 5000 to facilitate credit guarantee support to collateral free / third-party guarantee-free loans to the Micro and Small enterprises, who are generally considered to be a high risk lending, especially in the absence of collateral. It facilitates access to finance for un-served and under-served geographies, making availability of finance from conventional lenders to new generation entrepreneurs and under privileged, who lack supporting their loan proposal with collateral security and/or third- party guarantee.
CGTMSE introduced the Credit Guarantee Scheme (CGS) for Micro and Small Enterprises (MSEs) which guarantees credit facilities up to INR 200 lakh on automated digital platform, extended by Member Lending Institutions (MLIs) to those MSE loans, which are not backed by collateral security and / or third-party guarantees. The main objective of the scheme is that lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed. The other objective is that lender availing guarantee facility should endeavour to give composite credit (term loan and working capital facilities from single agency) to the borrowers.
In its over 18 years of operations, CGTMSE has approved over 31 lakh of guarantees covering loans amounting to over ₹1.53 lakh crore on cumulative basis. The units supported by CGTMSE have generated employment to the tune of above 1 crore and export earning of ₹8,980 crore. Approximately, 16% women and 8% SC/ST/Minorities entrepreneurs have been benefited by the scheme.
In order to cover large number of MSEs and improve the ease of delivery, there have been continuous modifications in the product line of CGTMSE. CGTMSE has also introduced some structural changes in the current guarantee schemes, which would make the scheme more attractive to the MLIs and would enable increased credit flow to the MSME Sector.
What are the fees charged by the CGTMSE?
The fees charged by the trust fund is a percentage of 1% p.a of the amount so sanctioned:
1. 0.75% – for credit of up to Rs. 5 Lakhs
2. 0.85% for credit above Rs. 5 Lakhs but up to Rs. 100 Lakh
The credit guarantee available under this scheme is 75/80% of the amount so given to a maximum cap of Rs. 62.5 Lakh / 65 Lakh for a credit facility of up to Rs. 50 Lakhs. The percentage guarantee is 85% for microenterprises for a sum of up to Rs. 5 lakhs. The percentage of guarantee is 50% of the amount so sanctioned for a credit of above Rs. 50 Lakhs with a maximum limit of Rs. 100 Lakhs. The tenure of the guarantee is a block of 5 years.
What is the extent of the cover given by CGTMSE?
The extent of cover is up to 80% for –
1. Micro and small enterprise which are operated and owned by women entrepreneurs.
2. All credits or loans given to the North eastern states of India including the state of Sikkim.
In case of default, the trust will settle the claim up to 75% or 80% of the amount no repaid up to the limit cap of Rs. 50 Lakhs. For the amounts above Rs. 50 Lakhs to Rs. 200 Lakhs the guarantee cover is reduce to 50%.
Which enterprises can avail the CGTMSE fund?
The enterprises which are eligible for this scheme are:
- New as well as existing Micro, Small and Medium enterprises who are engaged in the process of;
a. manufacturing activity
b. service activity, except:
i. Retail Trade
ii. Educational Institutions
iii. Self Help Groups
iv. Training Institutions.
It is now available for selected NBFC’s also.
Which banks are associated with the CGTMSE scheme?
The banks which can work as eligible lenders are:
- Schedules Commercial Banks, which may be either Public or Private Sector or a Foreign bank.
- NABARD has classified some Regional Rural Banks under the “Sustainable Viable” category. These banks can act as a Eligible Bankers.
- There are 133 eligible lending institutions registered as MLI’s of the TRUST. (Till May 31, 2015) which comprises of:
a. 26 Public Sector Banks
b. 21 Private Sector Banks
c. 73 Regional Rural Banks
d. 4 Foreign Banks
e. Delhi Financial Corporation
f. Kerala Financial Corporation
g. Jammu & Kashmir Development Finance Corporation Ltd.
h. Export-Import Bank of India
i. The Tamil Nadu Industrial Investment Corporation Ltd.
j. National Small Industries Corporation (NSIC), North Eastern Development Finance Corporation (NEDFI)
k. Small Industries Development Bank of India (SIDBI)
How can one opt for this scheme?
The procedure to opt for this scheme is explained below:
- The first and the foremost step to avail this scheme is to prepare a proper Business Plan including all the details financial and otherwise. The business model should be such that it explains out the viability of the project.
- After the business model is constructed, the decision regarding which lender bank to approach is to be taken. Once that is done the application along with the business model is to be submitted to the bank.
- The bank will check and verify all the details of the application and the model of the project so submitted.
- After verification, the bank will further send the application to the CGFTMSE Fund where the application will be scrutinized again. If it is approved the Fund will instruct the bank to release funds for the business.
After the approval comes through the business will have to pay the borrowers will have to pay the CGTMSE guarantee and service fee.
