Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE)

Introduction

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) was launched by Ministry of Micro, Small and Medium Enterprises, Government of India, and the Small Industries Development Bank of India (SIDBI). This scheme is launched to make available collateral-free credit to the micro and small enterprise sector. Existing and new enterprises both are eligible to be covered under the scheme.

On August 30, 2000 scheme was formally launched. CGTMSE corporis is being contributed ratio is 4:1 by the GoI and SIDBI and has contributed Rs. 2477.78 crore to the corporis of the Trust up to May 31, 2016. As per declare package for MSEs, the corporis was to be raised to Rs.2500 crore by the end of 11th Plan.

Objective of CGTMSE

The main objective of CGTMSE is:

• To give credit guarantee to financial institutions that provide loans to SMEs and MSMEs. This scheme is helpful for the major source of support to the first generation entrepreneurs to realise their dream of setting up a unit of their own Micro and Small Enterprise (MSE).
• To stimulate entrepreneurs to take collateral-free loans for starting businesses without the fear of defaulting. It will reimburse by the trust fund lending institution up to a certain limit, in case the borrower defaults.
• A new “Hybrid Security” has introduced by CGTMSE for product allowing guarantee cover for the portion of credit facility not covered by collateral security.

Features of CGTMSE

• Guarantees a return of up to 75% (85% in some cases) of the loan amount with a maximal cap of Rs.62.5 – 65 lakh for loans up to Rs. 50 Lakh.
• Trust will provide a maximal guarantee of 50% for loans above Rs.50 Lakh and less than Rs.100 Lakh.
• It provides a warranty of up to 85% to micro enterprises for loans up to Rs. 5 Lakh.
• It also guarantees repayment up to 80% of the loan amount for MSMEs headed by women and loans provided in the North East Region (NER).

Charges expected by the CGTMSE:

The CGTMSE expected the following charges –

• 0.75% for loans up to Rs.5 Lakh.
• 0.85% for loans exceeding Rs.5 Lakh and less Rs.100 Lakh.

Eligible Lending Institutions

All scheduled commercial banks and specified Regional Rural Banks, NEDFi, NSIC, NBFCs & Small Finance Banks (SFBs), SIDBI which have entered into an annexure with the Trust for the aim. Deserving lending Institutions, on entering with an agreement with CGTMSE, become Member Lending Institutions (MLIs) of CGTMSE.

Eligible Borrowers

New as well as current Micro and Small Enterprises.

Maximum Risk Cover

The credit facilities expanded by Trust shall guarantee, MLIs, in case of default by the borrower, upto 50/ 75 / 80/ 85 % (as per the current structure), of the defaulted principal amount in respect of term credit including interest on principal for one quarter or outstanding working capital advances (inclusive of interest), as on the date of account becoming NPA/as on the date of filing the suit, whichever is lower.

Tenure of Guarantee

Where working capital facilities lonely are expanded to eligible borrowers, the period of 5 years or block of 5 years for renewal of the guarantee cover, provided MLI pays the Annual Service Fee due as on 31, March, latest by inside 60 days from the date of claim by CGTMSE.

Fee for Guarantee

A united all-in Annual Guarantee Fee of 1.0 % p.a. of the credit facility prescribe (0.75% for credit facility upto Rs. 5 lakh and 0.85% for more than Rs. 5 lacs and upto 100 lacs for Women, Micro Enterprises and units in NER including Sikkim) is now entity charged.

Website / Circulars

All details of the scheme along with latest circulars are available in the www.cgtmse.in. website of CGTMSE.

Scheme Awareness Programmes

Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE) mobilisation consciousness programme on Credit  Guarantee Scheme (CGS) for entrepreneurs / bankers in guild with HIMCON in Himachal Pradesh, Uttarkhand, Punjab and Haryana. We welcome MLIs/Bankers and entrepreneurs to go in the workshops and hunt up your support in making it a success.

Conclusion

Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE) is an administration activity launched for Micro/Small Enterprises by the Ministry of Medium, Small and Micro Enterprises (MSME) in relationship with the (SIDBI). Its aim is developing solid credit alleviation framework to advance a superior credit stream to the MSME segment.

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