Credit Guarantee Fund Scheme for Micro and Small Companies

Credit Guarantee Fund Scheme for Micro and Small Companies


1. Of all issues faced by the MSEs, non-availability of prompt and credit that is adequate reasonable rate of interest the most crucial. One of several significant reasons for low option of bank finance to the sector may be the risk that is high of this banking institutions in lending to MSEs and consequent insistence on collaterals that aren’t readily available with one of these enterprises. The thing is much more serious for micro enterprises needing little loans plus the first generation business owners.

2. The Credit Guarantee Fund Scheme for Micro and tiny Enterprises (CGS) was released by the federal government of Asia (GoI) to offer collateral-free credit towards the micro and enterprise sector that is small. Both the present and also the brand new enterprises are entitled become covered beneath the scheme. The Ministry of Micro, Small and Medium Enterprises, GoI and Small Industries developing Bank of Asia (SIDBI), founded a Trust known as Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to make usage of the Credit Guarantee Fund Scheme for Micro and Small Enterprises. The scheme ended up being formally launched on August 30, 2000. The corpus of CGTMSE will be added by the GoI and SIDBI within the ratio of 4:1 correspondingly and has now added Rs. 2477.78 crore towards the corpus for the Trust as much as might 31, 2016. The corpus was to be raised to Rs.2500 crore by the end of 11th Plan as announced in the Package for MSEs.

Qualified Lending Institutions

3. The Banking institutions / Financial Institutions, which meet the criteria underneath the scheme, are planned banks that are commercialPublic Sector Banks/Private Sector Banks/Foreign Banks) and choose Regional Rural Banks (which were categorized under ‘Sustainable Viable’ category by NABARD). As may 31, 2016, there have been 133 eligible Lending organizations registered as MLIs for the Trust, comprising of 26 Public Sector Banks, 21 Private Sector Banks, 73 Regional Rural Banks (RRBs), 4 Foreign Banks and 9 other institutions in other words. Delhi Financial Corporation, Kerala Financial Corporation, Jammu & Kashmir developing Finance Corporation Ltd, Andhra Pradesh State Financial Corporation, Export Import Bank of Asia, The Tamil Nadu Industrial Investment Corporation Ltd., National Small Industries Corporation (NSIC), North Eastern developing Finance Corporation (NEDFI) and Small Industries developing Bank of Asia (SIDBI).

Eligible Credit Center

4. The credit facilities that are entitled to be covered under the scheme are both term loans and/or working money center as much as Rs.100 lakh per borrowing product, extended without the safety security and / or 3rd party guarantee, to a different or current micro and enterprise that is small. For those of you devices covered underneath the guaranteescheme, that may be unwell because of factors beyond the control over administration, rehabilitation help extended by the loan provider could be covered under also the guarantee scheme. Any credit center in respect of which risks are furthermore covered under a scheme, operated by Government or other agencies, won’t be qualified to receive protection underneath the scheme.

Guarantee Protect

5. The guarantee address available beneath the scheme is the degree of maximum 85% of this sanctioned quantity of the credit center. The guarantee address supplied is as much as 75per cent associated with the credit facility as much as Rs.50 lakh (85% for loans as much as Rs. 5 lakh supplied to micro enterprises, 80% for MSEs owned/ operated by ladies and all sorts of loans to NER including Sikkim) with a consistent guarantee at 50% for your quantity if the credit publicity is above Rs.50 lakh or over to Rs.100 lakh. In case there is standard, Trust settles the claim as much as 75per cent (or 85% / 80% / 50% wherever applicable) associated with the quantity in default associated with credit center extended by the loan company. The amount in default is reckoned as the principal amount outstanding in the account of the borrower, in respect of term loan, and amount of outstanding working capital facilities, including interest, as on the date of the account turning Non-Performing Asset (NPA) for this purpose.

Tenure of Guarantee

6. The Guarantee address under the scheme is actually for the agreed tenure associated with term loan/composite credit. The guarantee cover is of 5 years or block of 5 years in case of working capital.

Fee for Guarantee

7. A composite all-in guarantee that is annual of 1.0 percent p.a. associated with the credit center sanctioned (0.75% for credit center upto Rs. 5 lakh and 0.85% for above Rs. 5 lakh and upto 100 lakh for females, Micro companies and units in NER including Sikkim) is now being charged.

Site / Circulars

8. Information on the scheme along side latest circulars can be purchased in the web site of CGTMSE at

Scheme Awareness Programmes

9.1 CGTMSE has used approach that is multi-channel producing knowing of the CGS amongst banks, MSE industry associations, MSE sector, etc. through printing and press news, performing workshops / seminars, going to the programmes arranged at different district / state / national fora, etc. Through the 12 months, CGTMSE read took part in various seminars / workshops arranged by MLIs andIndustry Associations, exhibitions and conferences arranged by RBI / Govt. associated with MSE sector, in the united states to produce understanding about CGS. CGTMSE officials also held company development conferences using its Member Lending Institutions. Sustained printing news campaigns had been completed in the united states through the entire 12 months to boost presence and produce understanding in regards to the scheme. Information dissemination promotions had been vigorously completed amongst various stakeholders.

9.2 During FY 2016, CGTMSE took part in 21 Seminars/ Workshops/ Bankers’ meet/ Business Development Meetings, and in addition made presentations to sensitize bank officials/ little enterprises in the different components of the Credit Guarantee Scheme. The workshops/ programmes had been generally speaking arranged because of the known member banks / SIDBI / CGTMSE / Industry Associations, etc.

Operational Highlights of CGTMSE

10. As may 31, 2016, cumulatively 24,31,490 proposals from micro and little enterprises have actually been authorized for guarantee cover for aggregate credit of Rs.1,13,500.61 crore, extended by 119 active MLIs. A year-wise guarantee authorized growth place is indicated within the dining table below:

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