The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) recently approved ₹1 lakh crore in credit guarantees for Micro and Small Enterprises (MSEs), in a record 172 days.
About Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE):
- It was established by the Union Government and Small Industries Development Bank of India (SIDBI) in 2000.
- Its primary goal is to provide credit guarantees to financial institutions lending to micro and small enterprises (MSEs), thereby promoting the flow of credit to the sector.
Key Objectives
- CGTMSE aims to enhance the availability of credit to MSEs without the need for collateral or third-party guarantees, thus reducing the risk aversion of banks and financial institutions.
- By providing guarantee cover, it encourages lending to the underserved segments of the MSE sector, fostering entrepreneurship and economic growth at the grassroots level.
Salient Features
- Loan Coverage: CGTMSE covers credit facilities (both term loans and working capital) extended to MSEs, with a maximum limit of ₹2 crore per borrowing unit.
- Guarantee Coverage: Up to 85% of the defaulted principal amount is covered by the trust, depending on the category of borrower and loan amount.
- Eligibility: Any new or existing MSEs engaged in manufacturing or service activities can avail of loans under the CGTMSE scheme. Retail trade, educational institutions, agriculture, and self-help groups (SHGs) are excluded.
- No Collateral: Loans up to ₹2 crore are guaranteed without requiring collateral security or third-party guarantees.
Benefits
- It provides confidence to banks and financial institutions to extend loans to MSEs, leading to an increase in the sector’s growth.
- By ensuring credit availability, it promotes innovation and enterprise among small-scale entrepreneurs, who otherwise find it difficult to access funding.
- With the growth of MSEs, the scheme contributes to job creation, particularly in rural and semi-urban areas.
Key Achievements by CGTMSE:
- In FY24, the scheme had approved Rs 2 lakh crore guarantees, the highest ever in a single Financial Year.
- Rs 1.04 lakh crore were approved in FY23 across 11.65 lakh guarantees and Rs 56,172 crore across 7.17 lakh guarantees in FY22.
- The scheme provides up to 85% guarantee cover for loans up to Rs 5 lakh by eligible MSEs, up to 75 per cent for loans between Rs 5 lakh and Rs 5 crore.
- To boost women beneficiaries, the MSME Ministry declared higher credit guarantee coverage of 90% under the CGTMSE scheme, potentially benefitting 27 lakh women-led MSMEs.
- The finance minister had announced an infusion of Rs 9,000 crore to enable additional collateral-free credit of Rs 2 lakh crore to MSMEs, and reduce the cost of credit by 1%.
Ref: Source
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Frequently Asked Question:
What is CGTMSE?
CGTMSE stands for the Credit Guarantee Fund Trust for Micro and Small Enterprises, established to provide credit guarantees to financial institutions lending to micro and small enterprises (MSEs) in India.
Who established CGTMSE?
CGTMSE was established by the Union Government of India in collaboration with the Small Industries Development Bank of India (SIDBI) in 2000.
What is the primary objective of CGTMSE?
The primary objective of CGTMSE is to enhance the availability of credit to MSEs without requiring collateral or third-party guarantees, thereby encouraging banks and financial institutions to lend to this underserved sector.
What is the guarantee coverage provided by CGTMSE?
CGTMSE provides guarantee coverage of up to 85% of the defaulted principal amount, depending on the borrower category and loan amount.