Governments Credit Guarantee Scheme for MSE’s

What is the Scheme ?

The CGTMSE is a Credit Guarantee Scheme for Micro and Small Enterprises which covers collateral free credit facility (both term loan and/ or working capital) extended by eligible lending institutions to new and existing micro and small enterprises up to Rs.200 lakhs.

What is the extent of the cover given by CGTMSE?

The extent of cover for cases sanctioned on or after April 01, 2018 is up-to :

  1. 85% – for the credit facility up-to Rs. 5 lakhs, subject to Rs.4.25 lakhs in case of defaults.
  2. 80% – for Micro and Small enterprises which are operated and owned by women enterprises and credits given to North eastern states of India including the state of Sikkim, subject to Rs.40 lakhs in case of defaults.
  3. 75% – for the credit facility above Rs.5 lakhs and up-to Rs. 50 lakhs, subject to Rs.37.50 lakhs in case of default
  4. 75% – for the credit facility above Rs. 50 lakhs to Rs.200 lakhs, subject to Rs.150 lakhs in case of defaults.
  5. 50% – to the MSE Retail Trade for credit facility above Rs.50 lakhs to Rs.100 lakhs , subject to Rs.50 lakhs in case of default.

Which enterprises can avail the CGTMSE fund?

New as well as existing Micro and Small enterprises who are engaged in the process of :

  1. Manufacturing activity
  2. Service activity, except :
    • Educational Institutions
    • Self Help Groups
    • Training Institutions

Which banks are associated with the CGTMSE scheme?

The banks which can work as eligible lenders are:

  1. All Scheduled Commercial Banks, which may be either Public or Private Sector or a Foreign bank.
  2. NABARD has classified some Regional Rural Banks under the “Sustainable Viable” category. These banks can act as a Eligible Bankers.
  3. The institutions that enter into an agreement with CGTMSE are called Member Lending Institutions (MLIs).

How can one opt for this scheme?

The procedure for getting a loan under CGTMSE(Credit Guarantee Fund Trust for Micro and Small Enterprises) is as follows:

  1. Registration : One should register a business entity as per existing laws. This can be a partnership firm, a private company, proprietorship, etc.
  2. Business Plan : Borrowers need to conduct a market analysis and prepare a business plan containing relevant information such as business model, promoter profile, projected financials, etc. The report is then presented to the credit facility and an application is filed for getting the loan under CGTMSE scheme.
  3. Sanction for Bank Loan : The request for bank loan usually contains credit term and working capital facilities. After the application and business plan are under process, banks carefully analyse the viability of business model and process the loan application and accord sanction as per the bank’s policy.
  4. Obtaining the Guarantee Cover : Once the loan is sanctioned, bank applies to CGTMSE and obtains the cover for the loan. If the loan is approved by CGTMSE, the borrower will have to pay the trust, a guarantee fee and the service charges.

What are the fees charged by the CGTMSE?

Annual Guarantee Fees will be charged on the guaranteed amount for the first year and on the outstanding amount for the remaining tenure of the credit facilities sanctioned / renewed to MSEs.(for cases sanctioned on or after April 01, 2018)

  1. 1% – for credit facility up to Rs.5 lakhs
  2. 1.5% – for credit facility up to Rs.50 lakhs
  3. 1.35% – for credit facility upto Rs.50 lakhs sanctioned to Micro and Small enterprises which are operated and owned by women enterprises and credits given to North eastern states of India including the state of Sikkim.
  4. 1.80% – Above Rs.50 lakhs and up to Rs.200 lakhs
  5. 2.00% – For Retail trade above Rs.10 lakhs and upto Rs.100 lakhs

Tenure of Guarantee

The Guarantee cover under the scheme is for the agreed tenure of the term loan/composite credit. In case of working capital, the guarantee cover is of 5 years or block of 5 years.

The CGTMSE is an important scheme that every Indian Entrepreneurs and Business Owners must know about and understand. We urge all registered MSME’s to take the benefit of the scheme.

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