Credit Guarantee Funds Trust for Micro and Small Enterprises (CGTMSE) is a trust established by the Government of India, under the Ministry of Micro, Small and Medium Enterprises (MoMSME) and Small Industries Development Bank of India (SIDBI). Launched in 2000, the CGTMSE scheme offers credit guarantees to financial institutions that offered credit facilities up to Rs. 2 crores has now been raised to Rs. 5 crores. CGTMSE scheme offers credit guarantees from 75% to 85% to MSEs across India.
What is the CGTMSE?
| Interest Rates | As per RBI’s Guidelines is eligible for coverage under CGTMSE |
| Eligible Activities |
|
| Loan Amount |
|
| Guarantee Coverage | From 75% – 85% (50% Coverage for retail activity) |
| Collateral / Third Party Guarantee | Not required |
| Eligible Member Lending Institutions (MLIs) | More than 100: PSUs, NBFCs, RRBs, Private Banks, SUCBs, Fls, SFBs, and Foreign Banks |
| Annual Guarantee Fee for amount up to Rs. 1 crore | Fee revised from 2% and reduced to as low as 0.37% |
The whole idea behind this trust is to provide financial assistance to these industries without any third party guarantee/ or collateral. These schemes provide the assurance to the lenders that in case of default by them a guarantee cover will be provided by trust in the ratio of 50/75/80/85 percent of the amount so given. The objectives of this fund are:
- To check the financial viability of the project of these companies
- To give term loans and composite credit schemes
As per this scheme, a loan of up to Rs. 200 lakhs can be given to MSMEs. A special preference is given to the women entrepreneurs who are eligible for this scheme. Loans are also provided to borrowers who are located in the Northeastern States of India including Sikkim and Jammu and Kashmir.
What are the fees charged by the CGTMSE?
The fees charged by the trust fund is a percentage of 1% p.a of the amount so sanctioned:
- 0.75% – for credit of up to Rs. 5 Lakhs
- 0.85% for credit above Rs. 5 Lakhs but up to Rs. 100 Lakh
The credit guarantee available under this scheme is 75/80% of the amount so given to a maximum cap of Rs. 62.5 Lakh / 65 Lakh for a credit facility of up to Rs. 50 Lakhs. The percentage guarantee is 85% for micro-enterprises for a sum of up to Rs. 5 lakhs. The percentage of guarantee is 50% of the amount so sanctioned for a credit of above Rs. 50 Lakhs with a maximum limit of Rs. 100 Lakhs. The tenure of the guarantee is a block of 5 years.
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%
Which banks are associated with the CGTMSE scheme?
The banks which can work as eligible lenders are:
- Schedules Commercial Banks, which may be either Public or Private Sector or a Foreign bank.
- NABARD has classified some Regional Rural Banks under the “Sustainable Viable” category. These banks can act as a Eligible Bankers.
- There are 133 eligible lending institutions registered as MLI’s of the TRUST. (Till May 31, 2015) which comprises of:
a. 26 Public Sector Banks
b. 21 Private Sector Banks
c. 73 Regional Rural Banks
d. 4 Foreign Banks
e. Delhi Financial Corporation
f. Kerala Financial Corporation
g. Jammu & Kashmir Development Finance Corporation Ltd.
h. Export-Import Bank of India
i. The Tamil Nadu Industrial Investment Corporation Ltd.
j. National Small Industries Corporation (NSIC), North Eastern Development Finance Corporation (NEDFI)
k. Small Industries Development Bank of India (SIDBI)
FAQs
Which enterprises can avail the CGTMSE fund?
The enterprises which are eligible for this scheme are : New as well as existing Micro, Small and Medium enterprises who are engaged in the process of;
a. manufacturing activity
b. service activity, except:
i. Retail Trade
ii. Educational Institutions
iii. Self Help Groups
iv. Training Institutions.
It is now available for selected NBFC’s also.
What is the extent of the cover given by CGTMSE?
The extent of cover is up to 80% for –
- Micro and small enterprise which are operated and owned by women entrepreneurs.
- All credits or loans given to the North eastern states of India including the state of Sikkim.
In case of default, the trust will settle the claim up to 75% or 80% of the amount no repaid up to the limit cap of Rs. 50 Lakhs. For the amounts above Rs. 50 Lakhs to Rs. 200 Lakhs the guarantee cover is reduce to 50%.
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