The Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE) is a trust set up by the Government of India, operating under the Ministry of Micro, Small and Medium Enterprises (MoMSME) and the Small Industries Development Bank of India (SIDBI). Since its launch in 2000, the CGTMSE scheme has provided credit guarantees to financial institutions that extend credit facilities, which have increased from Rs. 2 crores to Rs. 5 crores. The scheme offers credit guarantees ranging from 75% to 85% for micro and small enterprises (MSEs) throughout India. Let’s explore various aspects of the CGTMSE scheme in more detail.
Credit Guarantee under the CGTMSE Scheme
Credit Guarantee is a scenario where a loan to an applicant is supported by a party, eliminating the need for external collateral or a third-party guarantee. In this case, the loan approved by the member lending institution is secured by the scheme, which offers a guarantee cover for a significant portion of the loan amount. The CGTMSE scheme allows both new and existing micro and small enterprises, including those in manufacturing and services, to access a credit facility of up to Rs. 5 crores.
Benefits of CGTMSE Scheme
- Ceiling for Guarantee coverage raised from Rs. 200 lakh to Rs. 500 lakh
- Guarantee fee reduced to diminish the overall cost of borrowings to MSEs
- Micro Finance Institutions as Member Lending Institutions (MLIs) are now eligible
- Concessions related to fees and increased coverage to SC/STs
- Reduced Guarantee fee by 10% and coverage extent increased to 85% to Women, ZED Certified Units and Units in Aspirational Districts
- Annual Guarantee Fee structure revised and fee reduced to as low as 0.37%
CGTMSE Guarantee
Eligible institutions can offer collateral-free credit facilities, both fund-based and non-fund-based, to new and existing Micro and Small enterprises, including Service Enterprises, with a maximum credit limit of Rs. 5 crores.
CGTMSE Coverage Criteria:
a) The trust provides guarantees of up to 75% of the defaulted principal amount (or up to 85% for certain categories of borrowers). The maximum guarantee cap is Rs. 37.50 lakh for credit facilities up to Rs. 50 lakh.
b) Term credit, including interest on the principal, is covered for a period of one quarter and/or outstanding capital advances, including interest, as of the date the account becomes a Non-Performing Asset (NPA) or the date of filing the suit, whichever is lower.
