Context: Ministry of MSME has issued guidelines for revamping of Credit Guarantee Scheme for Micro & Small Enterprises with effect from 1st April 2023. CGTMSE created a landmark by touching the milestone approving guarantees worth Rs 1 lakh crore during FY 2022-23.
Revamped Credit Guarantee Scheme for Micro & Small Enterprises Scheme
- Objective of CGTMSE Scheme: Aims to encourage first generation entrepreneurs to venture into self-employment opportunities by facilitating credit guarantee support for collateral free/third party guarantee free loans to Micro & Small enterprises (MSEs), especially in absence of collateral. To operationalise the scheme, Government of India and SIDBI set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
- Guarantee coverage ranges from 85% for Micro enterprises up to Rs 5 lakhs to 75% for others. 50% coverage for retail activity.
- Corpus of Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE) has been infused with a sum of Rs 8,000 crore to enable additional collateral free guaranteed credit of Rs 2 lakh crore and reduction in cost of credit by 1%.
- Reduction of Annual Guarantee Fee for loans up to Rs 1 crore from a peak rate of 2% p.a. to as low as 0.37% per annum. This will reduce overall cost of credit to Micro & Small Enterprises to a great extent.
- Limit on ceiling for guarantees has been enhanced from Rs 2 crore to 5 crores. Hence, under the scheme provides credit guarantee for loans up to Rs 5 crore, without collateral and third-party guarantee.
- No legal proceedings up to Rs 10 lakhs: For settlement of claims in respect of guarantees for loan outstanding up to Rs 10 lakh, initiation of legal proceedings will no longer be required.
- Lending Institutions through which CGTMSE Scheme is eligible: Scheduled Commercial Banks including private banks, select Regional Rural Banks, Selected NBFCs and Small Finance Banks, NSIC, NEDFI, SIDBI and The Tamil Nadu Industrial Investment Corporation(TNIIC).