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The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE)
was launched by the Government of India to make available collateral-free c
redit to the micro and small enterprise sector. Both the existing and the
new enterprises are eligible to be covered under the scheme. The Ministry
of Micro, Small and Medium Enterprises and Small Industries Development
Bank of India (SIDBI), established a Trust named Credit Guarantee Fund
Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit
Guarantee Fund Scheme for Micro and Small Enterprises. The scheme was
formally launched on August 30, 2000 and is operational with effect from
1st January 2000. The corpus of CGTMSE is being contributed by the
Government and SIDBI in the ratio of 4:1 respectively and has contributed
Rs.1346.54 crore to the corpus of the Trust up to September 30, 2007.
Based on the future requirement, the corpus is likely to be raised to
Rs.2500 crore.
Eligible Lending Instititution:
The institutions, which are eligible under the scheme, are scheduled
commercial banks (Public Sector Banks/Private Sector Banks/Foreign Banks)
and select Regional Rural Banks (which have been classified under
'Sustainable Viable' category by NABARD). National Small Industries
Corporation Ltd. (NSIC), North Eastern Development Finance Corporation
Ltd. (NEDFi) and SIDBI have also been made eligible institutions. As on
September 30, 2007, there are 62 Member Lending Institutions (MLIs) of the
Trust, comprising 28 Public Sector Banks, 13 Private Sector Banks, 18
Regional Rural Banks and 3 other Institutions viz., NSIC, NEDFI and SIDBI.
Eligible Credit Facility:
The credit facilities which are eligible to be covered under the scheme
are both term loans and working capital facility up to Rs.50 lakh per
borrowing unit, extended without any collateral security or third party
guarantee, to a new or existing micro and small enterprise. For those units
covered under the guarantee scheme, which may become sick owing to factors
beyond the control of management, rehabilitation assistance extended by the
lender could also be covered under the guarantee scheme. It is noteworthy
that if the credit facility exceeds Rs.50 lakh, it may still be covered
under the scheme but the guarantee cover will be extended for credit
assistance of Rs.50 lakh only. Another important requirement under the
scheme is that the credit facility should be availed by the borrowing
unit from a single lending institution. However, the unit already assisted
by the State Level Institution/NSIC/NEDFi can be covered under the scheme
for the credit facility availed from member bank, subject to fulfillment
of other eligibility criteria. Any credit facility in respect of which
risks are additionally covered under a scheme, operated by Government or
other agencies, will not be eligible for coverage under the scheme.
Guarantee Cover:
The guarantee cover available under the scheme is to the extent of 75 per
cent of the sanctioned amount of the credit facility. The extent of
guarantee cover is 80 per cent for (i) micro enterprises for loans up to
Rs.5 lakh; (ii) MSEs operated and/or owned by women; and (iii) all loans in
the North-East Region. In case of default, Trust settles the claim up to 75%
(or 80%) of the amount in default of the credit facility extended by the
lending institution. For this purpose the amount in default is reckoned as
the principal amount outstanding in the account of the borrower, in respect
of term loan, and amount of outstanding working capital facilities,
including interest, as on the date of the account turning Non-Performing
Asset (NPA).
Tanure of Guarantee:
The Guarantee cover under the scheme is for the agreed tenure of the term
loan/composite credit. In case of working capital, the guarantee cover is
of 5 years or block of 5 years.
Fee for Guarantee:
The fee payable to the Trust under the scheme is one-time guarantee fee of
1.5% and annual service fee of 0.75% on the credit facilities sanctioned.
For all loans in the North-East Region, the one-time guarantee fee is only
0.75%.
Website:
The operations of CGTMSE are conducted through internet. The website of
CGTMSE has been hosted at www.cgtsi.org.in
Scheme Awareness Programme:
CGTMSE has adopted multi-channel approach for creating awareness about its
guarantee scheme amongst banks, MSE associations, entrepreneurs, etc.
through print and electronic media, by conducting workshops/seminars,
attending meetings convened at various district/state/national fora, etc.
As on 30 September 2007, 527 workshops and seminars were conducted on Credit
Guarantee Scheme. Also, CGTMSE participated in 15 exhibitions and attended
165 SLBC/meetings convened by RBI/other Government offices. Posters and
mailers have been circulated to banks, industry associations, and other
stakeholders for promoting the scheme and creating its greater awareness.
With a view to imparting training to MLIs through their training colleges,
multimedia CD-ROM containing operational modalities of the scheme, was
distributed to the staff training centers/colleges of the MLIs. The Trust
has recently launched an advertisement campaign in 194 newspapers across
the country through DAVP, which has created considerable awareness about
the scheme among the target audience.
Operational Highlights of CGTMSE:
As on September 30, 2007, 81345 proposals from micro and small enterprises
have been approved for guarantee cover for aggregate credit of Rs.2152.20
crore, extended by 44 MLIs in 35 States/UTs. As a result of increased
awareness campaigns of CGTMSE and active support of all the stakeholders,
the pace of proposals being accepted for guarantee cover has gone up
significantly.
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