CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL ENTERPRISES (CGTMSE)
MSME enterprises are the backbone of any economy and are an engine of economic growth, promoting equitable development for all. Therefore, to promote and develop MSMEs; the Government of Madhya Pradesh facilitates promotion and development of enterprises through many incentives, schemes and subsidies.
Micro Small and Medium Enterprises (MSMEs) are crucial for the economic growth and stability of any country and play a vital role especially for developing countries as they facilitate economic activity and provide employment thus contributing to poverty reduction.
INTRODUCTION
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) set up for giving wings to entrepreneurial zeal of millions of youth of this great country who are having bankable business ideas but lack collateral security and / or third party guarantee to access credit from formal source like Banks/NBFCs. CGTMSE extends them helping hand by providing guarantee to enable them access credit leading to setting up viable micro and small enterprises. Thereby transforming them from job seekers to job providers and meaningfully contribute in nation building.
OBJECTIVE
Availability of bank credit without the hassles of collaterals / third party guarantees would be a major source of support to the first-generation entrepreneurs to realise their dream of setting up a unit of their own Micro and Small Enterprise (MSE). Keeping this objective in view, Ministry of Micro, Small & Medium Enterprises (MSME), Government of India launched Credit Guarantee Scheme (CGS) so as to strengthen credit delivery system and facilitate flow of credit to the MSE sector. To operationalise the scheme, Government of India and SIDBI set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
CGTMSE has introduced a new “Hybrid Security” product allowing guarantee cover for the portion of credit facility not covered by collateral security. In the partial collateral security model, the Lending Institutions will be allowed to obtain collateral security for a part of the credit facility, whereas the remaining part of the credit facility, up to a maximum of Rs.500 lakh, can be covered under Credit Guarantee Scheme of CGTMSE. CGTMSE will, however, have pari-passu charge on the primary security as well as on the collateral security provided by the borrower for the credit facility.
The other objective is that the lender availing guarantee facility should endeavor to give composite credit to the borrowers so that the borrowers obtain both term loan and working capital facilities from a single agency. The Credit Guarantee scheme (CGS) seeks to reassure the lender that, in the event of MSE unit, which availed collateral free credit facilities, fails to discharge its liabilities to the lender, the Guarantee Trust would make good the loss incurred by the lender up to 50/75/80/85 per cent of the credit facility.
CREDIT GUARANTEE
Any collateral / third party guarantee free credit facility (both fund as well as non-fund based) extended by eligible institutions, to new as well as existing Micro and Small Enterprise, including Service Enterprises, with a maximum credit cap of Rs.500 lakh (Rupees Five Hundred lakhs only) are eligible to be covered. Recently, guarantee coverage made eligible to select NBFCs and Small Finance banks.
The guarantee cover available under the scheme is to the extent of 50%/ 75% / 80% & 85% of the sanctioned amount of the credit facility. The extent of guarantee cover is 85% for micro enterprises for credit up to 5 lakh. The extent of guarantee cover is 50% of the sanctioned amount of the credit facility for credit from 10 lakh to 100 lakh per MSE borrower for retail trade activity.
The extent of guarantee cover is 80%
(i) Micro and Small Enterprises operated and/or owned by women; and
(ii) all credits/loans in the North East Region (NER) for credit facilities upto Rs.50 lakhs. In case of default, Trust settles the claim up to 75% of the amount in default of the credit facility extended by the lending institution for credit facilities upto Rs.500 lakhs.
(iii) MSE Retail Trade : 50% of the amount in default subject to a maximum of Rs.50 lakhs.
The lender should cover the eligible credit facilities as soon as they are sanctioned. In any case, the lender should apply for guarantee cover in respect of eligible credits sanctioned in one calendar quarter latest by end of subsequent calendar quarter. Guarantee will commence from the date of payment of guarantee fee and shall run through the agreed tenure of the term credit in case of term loans / composite loans and for a period of 5 years where working capital facilities alone are extended to borrowers, or for such period as may be specified by the Guarantee Trust in this behalf.
ELIGIBLE ACTIVITY
1. Manufacturing
2. Service
3. Retail Trade (Upto 50% maximum Rs.50 Lacs)
Note: Self Help Groups and Agriculture activities are Ineligible for this scheme.
INTEREST RATES
Interest rates charged as per RBI Guidelines are eligible for coverage under the Scheme.
WHO ARE ELIGIBLE
MSME units such as Individuals / Proprietorship, LLP, Partnership, Private Limited Company or registered company are eligible to be covered under the scheme.
IS CGTMSE FEES CHARGED EVERY YEAR ?
Yes CGTMSE is charged every year.
IS CGTMSE FEE REFUNDABLE?
In case of pre-closure / request for refund, refund of proportionate annual guarantee fee (GF/AGF/ASF) will be allowed only where closure is marked in CGTMSE system/refund requested is within 3 months from the date of receipt of fee by CGTMSE.
LIMIT OF LOAN AMOUNT
Manufacturing Unit: The loan amount of Rs.1 lac to Rs.500 lacs will be given for the manufacturing units.
Trading and Service Sector: The loan amount of Rs.1 lac to Rs.50 lacs will be given for the Retail trading and service sector units.
ELIGIBLE BANKS
Businessmen can apply to all Public/ Private Sector Banks and Regional Gramin Banks which are registered as Member Lending Institutions (MLI) with CGTMSE.
DOCUMENTS REQUIRED?
· Aadhaar Card of Proprietor / Director/ Promoter.
· PAN of the Proprietor / Partnership /Private Limited Company / Public Limited Company /LLP/ etc
· Business Address Proof.
· Shop Act Registration/ Partnership Deed/ MoA and AoA.
· Last 3 yrs Income Tax Returns.
· Last 3 Year Profit & Loss A/c and Balance Sheet.
· GST Registration.
· Last 1 yr Bank Statement
· MSME Registration.