CREDIT GUARANTEE TRUST FUND SCHEME (CGTMSE SCHEME)

Background of the scheme

The major problem faced by the MSEs is non-availability of timely and adequate credit at reasonable interest rate which is most important to start and running successfully a business venture. One of the major causes for low availability of bank finance to this sector is the high risk perception of the banks in lending to MSEs and consequent insistence on collaterals which are not easily available with these enterprises. The problem is more serious for micro enterprises requiring small loans and the first generation entrepreneurs. 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 earnings of 8,980 crore. Approximately, 16% women and 8% SC/ST/Minorities entrepreneurs have been benefited by the scheme.

Objective of the scheme

The whole idea behind this scheme is to provide financial assistance to micro and small enterprises without any third-party guarantee/ or collateral. These schemes provide the assurance to the lenders that in case of default by them, a guarantee cover will be provided by trust.

Administration of scheme

Credit Guarantee Trust Fund for Micro and Small Enterprises subsidy scheme is administered by the Ministry of Micro, Small and Medium Enterprises, Government of India.

Concerned Department involved in Scheme Implementation

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) was launched in 2000 by the Government of India (GOI) to make available collateral-free credit to the micro and small enterprise sector. Both the existing and the new enterprises are eligible to be covered under the scheme. The Ministry of Micro, Small and Medium Enterprises, GOI and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises. The scheme was formally launched on August 30, 2000. The corpus of CGTMSE is being contributed by the GOI and SIDBI in the ratio of 4:1 respectively and has contributed Rs. 2477.78 crore to the corpus of the Trust up to May 31, 2016. As announced in the Package for MSEs, the corpus was to be raised to Rs.2500 crore by the end of 11th Plan.

Quantum of benefits available under CGTMSE scheme

Under Credit Guarantee Fund Scheme for Micro and Small Enterprises the beneficiaries are eligible to get collateral free loan up to a limit of 2 crores on payment of guarantee fee to bank by the beneficiary which will be further passed on to CGTMSE trust for the guarantee given by them.

The CGTMSE trust shall provide guarantee as under: –

*Women entrepreneurs/ Units located in North East Region (incl. Sikkim) other than credit facility up to Rs.5 lakh to micro enterprises.

Annual Guarantee fees charged (AGF)

With a view to incentivize the borrowers with good repayment track record, AGF would be charged on the outstanding loan amount instead of guaranteed amount for credit facilities sanctioned / renewed to MSEs on or after April 01, 2018 as detailed below:

*AGF will be charged on the guaranteed amount for the first year and on the outstanding amount for the remaining tenure of the credit facility.

MSE Retail Trade Activity

AGF will be charged at 2% of the guaranteed amount for the first year and on the outstanding amount for the remaining tenure of the credit facility. Differential pricing structure depending upon NPA / Claim payout ratio of the MLI will also be applicable on the AGF as per CGTMSE Circular No.107/2015-16 dated January 28 given below

Eligibility criteria

Eligible borrowers under this scheme

Any facility given on the basis of third party guarantee and where the type of activity is not manufacturing, services and retail trade shall be disqualified for coverage under the scheme. Partial collateral security model introduced where the MLIs will be allowed to obtain collateral security for a part of the credit facility, whereas the remaining part of the credit facility, up to a maximum of 200 lakh can be covered under the scheme. The Trust also reserves the right to reject any application for the guarantee cover, if it deems necessary.

How to apply under CGTMSE Scheme

First of all, you can’t apply for the loan under CGTMSE Scheme online. You have to contact to the banks nearby you. Candidates meeting the eligibility criteria may approach banks / financial institutions, and select Regional Rural Banks which are eligible under the scheme.