India has got 28 million Micro and Small Enterprises (MSE) offering employment to 80 million persons. MSE segment will contribute about 46% of the manufacturing unit and 40% of the Indian exports.
Let us understand the “Credit Guarantee Scheme”.
It is an exclusive situation where loan given to the applicant is supported by a party without any need for a third-party guarantee. The loan is sanctioned by the member institution and supported by the person, offering the guarantee coverage for a huge portion of the loan amounts.
This scheme was introduced on August 30, 2000, by the Ministry of Micro, small and medium industries, Government of India, SIDBI (Small Industries Development Bank of India) set up a trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to accomplish the relevant Credit Guarantee Scheme for Micro and Small Enterprises in India. The major share of the contribution came in the form of 4:1, where in Government and SIDBI played a major part.
The Credit Guarantee Fund Trust for Micro and Small Enterprises is established to analyse the flow of the institutional credit to the Micro and Small Scale Industries (MSE).
The Credit Guarantee Scheme was launched to empower the credit delivery systems and simplify the flow of credit to the MSE sector, creating access to financial resources for unprivileged entrepreneurs easily. This will make new generation entrepreneurs survive the troubles in getting loans for setting up their line of business.
The Credit Guarantee Scheme begins with the date of payment of the guarantee fees and moves through the complete tenure of the term credit for the term loans/composite loans for five years.
The main objective is lenders should give importance to project viability and protect the credit facility purely on the primary security of the assets financed. The other reason is the lender availing guarantee facility should give multiple credits to the borrowers so that the borrowers obtain both term loans and working capital facilities from a single agency.
Objectives of CGTMSE:
Features of CGTMSE:
Eligibility criteria under CGTMSE:
Formation of Business Enterprises:
Before taking up the assistance, the borrower will create a new company like a private partnership company, Limited Liability Company and proprietorship company and take relevant approvals, registrations for executing projects.
Superior Business Plans:
The applicant will carry out the market analysis and create a business plans dealing with details like Promoters Information, Financial Details, Business Model, and Nature of Business.
Sanctioning Bank Loans:
Before approving the bank loans, there are various credit terms and working capital facilities that come to the front and mostly the banks analyse the shelf life of the line of business and process the loan application. After a lot of field visits, the proposal of the applicant is authorised by the bank and the loan is sanctioned towards setting up a business enterprise.
Taking Guarantee Coverage:
After taking the loans from CGTMSE authority, you will get the guarantee coverage; the borrower will have to pay guarantee fees and service charges.
Procedures To Register For CGTMSE
CREDIT GUARANTEE UNDER CGTMSE:
|
GROUP |
UP TO 5 LAKHS |
ABOVE THE 5/50 LAKHS |
ABOVE 50-200 LAKHS |
|---|---|---|---|
|
Micro Enterprises. |
85% of the amount subject to maximum of 4.25 Lakhs, |
75% of the amount default subject to the maximum of 37.50 Lakhs. |
75% of the amount if the amount is 150 Lakhs. |
|
Women Entrepreneurs Units located in North East. |
80% of the amount default subject to maximum of 40 Lakhs. |
|
|
|
Other Category of Borrowers. |
75% of the amount if the amount is 37.50 Lakhs. |
|
|
|
ACTIVITY. |
10 LAKHS TO 100 LAKHS |
|
|
|
MSE Trade. |
50% of amount uptill INR 50 Lakhs |
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What types of borrowers are qualified for the guarantee under the CGTMSE Schemes?
New and existing small and micro industries involved in service and manufacturing field are qualified for guarantee under CGTMSE.
Is CGTMSE Scheme Fees charged every year?
Borrower will pay the Annual Guarantee fee of 1% per annum, 0.75% for credit till INR 50 Lakhs, 0.85% for credit above INR 50 Lakhs.
Is Mudra loan covered under the CGTMSE Schemes?
No, Mudra loan are provided under different scheme.
What is the lock in period under CGTMSE Scheme?
There is a lock in period of 18 months after the distributing of the amount.
Is Udyog Aadhar Number (UAN) vital for CGTMSE?
Yes Udhyog Aadhaar is required to apply under CGTMSE loan.
Can a trader be eligible for Udyam Registration?
Yes, it is vital for tradersto register for Udyam Certificate, in order to get the benefits.
What is the core benefit of CGTMSE?
The foremost benefit is that you get credit up till 1 Crore without any security and reduces the pressure on entrepreneurs to repay loan if the business fails.
How long is the validity of the MSME Certificate?
Validity of MSME certificate is for 5 years.
How do I know that MSME is registered?
UAM (UdyogAadhar Memorandum) portal has option to check the MSME registration details.
Who are the members lending Institutions under CGTMSE?
All banks and financial institutions are the MLI.
Any cut off dates is given for MSME to avail the CGTMSE?
Companies working since 2018 are eligible under this scheme.
Will any guarantee fees be charged under CGTMSE?
The guarantee fee charged is 1.50 per annum of the guaranteed amount.
Do we need to pay fees other than the guarantee fees?
No, other than guarantee fee no charges need to be paid.
How do I get loan under the CGTMSE Scheme?
You must submit the business plan/project report with all relevant bank offering loans under CGTMSE, and they deal with the term loans and working capital facilities.
Who is qualified to get the collateral loans?
The Collateral Loans are taken by the employees and the owners of the MSME, as it is a runaway hit in small towns.
Do we need to get all the credit facilities from a single lender, to be qualified for CGTMSE Credit guarantee?
No, The loan taken from more than one lender jointly/alone up to a maximum amount of Rs.100 lakh per borrower.
Are the borrowers from all the service sector enterprises eligible under this scheme?
The service sector enterprises coming under the MSMED Act of 2006 are qualified for coverage under this scheme.
Do we need to obtain the PAN Number Card for becoming an eligible borrower?
Yes, It would be ideal if the borrower obtains the PAN Card before obtaining the credit from the eligible lending institutions.
Whether the MSME accounts where the legal or the recovery activities are underway qualified under the CGTMSE Scheme?
Yes, where the recovery activities are underway like DRT (Debt Recovery Tribunals) and others. Money Lending Institutions will do it based on RBI Guidelines.
What is the risk factor assigned to the credit extended under the CGTSME?
Zero risk factor.
What is the difference between the Primary and Collateral Security?
Primary security is the asset created out of the loan by the borrower and Collateral security is the additional security offered for the loans. It consists of jewellery, house, and the vehicles.
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