Credit Guarantee Fund Scheme for Micro and Small Enterprises

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Credit Guarantee Fund Scheme For Micro and
Small Enterprises
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Introduction

• Of all the troubles faced by MSEs, the
  unavailability of timely and sufficient credit at
  a reasonable interest rate is one of the most
  important. One of the main causes of the scarce
  availability of bank financing for this sector is
  the high risk perception of banks in lending to
  MSEs and the consequent insistence on collateral
  that is not readily available with these
  companies. The problem is more serious for
  micro-enterprises applying for small loans and
  for first-generation entrepreneurs.
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Introduction
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The Micro and Small Business Credit Guarantee
Fund

• The Micro and Small Business Credit Guarantee
  Fund (CGS) scheme was launched by the Government
  of India (GoI) to make unsecured credit available
  to the micro and small business sector. Mutually
  existing and new businesses can be covered by the
  scheme. The Ministry of Small, Micro and Medium
  Enterprises, GoI and Small Industries Development
  Bank of India (SIDBI), has recognized a Trust
  called Credit Guarantee Fund Trust for Micro and
  Small Business (CGTMSE) to perform the Credit
  Guarantee Fund Scheme for Micro and Small
  Enterprises.The scheme was officially launched
  on August 30, 2000. The CGTMSE corpus was
  provided by the GoI and SIDBI in the ratio of 4
  1 respectively and contributed Rs. 2477.78 crore
  to the Trust corpus until 31 May 2016. As
  announced in the MSE Package, the corpus was to
  be raised to Rs. 2500 crore by the end of the
  11th floor.
•  Eligible Lending Institutions the Banks /
  Financial Institutions, which can benefit from
  the scheme, are programmed commercial banks
  (Public sector banks / Private sector banks /
  Foreign banks) and selected rural banks (which
  have been classified in the 'Sustainable'
  category by NABARD). Till May 31, 2016, there
  were 133 eligible credit institutions registered
  as MLI of the Trust, including 26 public sector
  banks, 21 private sector banks, 73 regional rural
  banks (RRBs), 4 overseas banks and 9 other
  institutions, for example Delhi Financial
  Corporation, Kerala Financial Corporation, Jammu
  Kashmir Development Finance Corporation Ltd,
  Andhra Pradesh State Financial Corporation, Bank
  such as Export and Import Bank of India and
  SIDBI.

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Eligible credit facility the credit lines

• Eligible credit facility the credit lines that
  can be covered by the scheme are both term loans
  and / or working capital line up to Rs. hundred
  lakh per borrower unit, extended without any
  collateral and / or third-party guarantee, to a
  new or existing micro and small businesses. For
  units covered by the guarantee scheme, which may
  become ill due to factors beyond management's
  control, rehabilitation assistance extended by
  the provider may also be covered by the guarantee
  scheme. Any credit line for which risks are
  further covered by a program, managed by the
  government or other agencies, will not be
  eligible for coverage under the program.
• Warranty coverage The coverage of the guarantee
  available under the scheme is up to a maximum of
  85 of the sanctioned amount of the credit line.
  The coverage of the guarantee given is up to 75
  of the credit line up to Rs.50 lakh (85 for
  loans up to Rs.5 lakh provided to
  micro-enterprises, 80 for MSE owned / managed by
  women and all loans to NER including Sikkim) with
  a uniform 50 guarantee for the full amount if
  the credit exposure is greater than Rs.50 lakh
  and up to Rs.100 lakh.

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In the event of default, the Trust terminates the
credit up to 75

• In the event of default, the Trust terminates the
  credit up to 75 (or 85 / 80 / 50 where
  applicable) of the defaulted amount of the credit
  line extended by the credit institution. To this
  end, the defaulting amount is calculated as the
  principal amount outstanding in the borrower's
  account, in relation to the term loan, and the
  amount of outstanding working capital lines,
  including interest, at the date the account is
  transformed the impaired business (NPA).Duration
  of the guarantee the guarantee coverage under the
  scheme covers the agreed term of the term /
  composite loan. In the case of working capital,
  the coverage of the guarantee is 5 years or block
  of 5 years.
• Guarantee feeA composite total annual guarantee
  fee of 1.0 per annum. Of the sanctioned credit
  line (0.75 for the credit line up to Rs. Five
  lakh and 0.85 for over Rs. Five lakh and up to
  hundred lakhs for women, micro-enterprises and
  units in the NER including Sikkim) is now being
  charged. Scheme awareness programsThe CGTMSE has
  adopted a multi-channel approach to raise
  awareness among banks, MSE sector associations,
  the MSE sector, etc. Through the press and the
  press, conducting workshops / seminars,
  participating in programs organized in various
  district / state / national forums, etc.

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During the year CGTMSE participated in several
seminars

• During the year CGTMSE participated in several
  seminars / workshops organized by MLI and sector
  associations, exhibitions and meetings organized
  by RBI / Govt. in connection with the MSE
  industry, across the country to create awareness
  of CGS. CGTMSE officials also held business
  development meetings with its member credit
  institutions.
• Sustained press campaigns were conducted across
  the country throughout the year to improve
  visibility and create awareness of the program.
  Campaigns to disseminate information among the
  various stakeholders were vigorously conducted.

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CONCLUSION

• During the 2016 financial year, CGTMSE
  participated in 21 seminars / workshops / banker
  meetings / business development meetings and also
  gave presentations to raise awareness of bank
  officials / small businesses on various aspects
  of the credit guarantee system. The workshops /
  programs were generally organized by member banks
  / SIDBI / CGTMSE / sector associations, etc.

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Contact us

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  email at profprakash_at_mbaprojectreports.com