CGTMSE or Credit Guarantee Fund Scheme for the Micro and Small Enterprises was launched by the Government of India to ensure there is a collateral-free credit to the micro and small enterprise sector. This scheme is applicable to both the existing and new enterprises. In this article, we look at the procedure for obtaining loan under CGTMSE scheme.
Establishment of CGTMSE
The Ministry of Micro, Small and Medium Enterprises, Government of India and Small Industries Development Bank of India (SIDBI) in collaboration has established a trust called as Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the Credit Guarantee Fund Scheme for Micro and Small Enterprises. However, this scheme was formally launched on August 30, 2000.
Objective of the Fund
The objective of the fund is to
- Check the financial viability of the project of the companies
- To give term loans and composite credit schemes
Fee Charged by CGTMSE
The fee charged by the trust fund is a percentage of 1% per annum of the total amount that is sanctioned.
- 0.75 % for credit of up to Rs. 5 Lakhs
- 0.85% for credit that is above Rs. 5 Lakh but up to Rs. 100 Lakh
The credit guarantee available for this scheme is 75/80% of the amount that is given to a maximum cap of Rs. 6205 Lakh/ 65 Lakh for a credit facility of up to Rs. 50 Lakhs. The percentage guarantee is 85% for microenterprises for a sum of up to Rs. 5 Lakhs. The percentage of guarantee is 50% of the amount that is sanctioned for a credit above Rs. 50 Lakhs with a maximum limit of Rs. 100 Lakhs. The tenure given for the guarantee is a block of 5 years.
Cover Offered by CGTMSE
The fund covers up to 80% for the following categories.
- Micro and small enterprises that are operated and owned by women entrepreneurs.
- All credits or loans that are given to the North Eastern states of India including the state of Sikkim.
In case of default, the trust settles the claim up to 75% or 80% of the amount no repaid up to the limit cap of Rs. 50 Lakhs. For amount above Rs. 50 Lakhs to Rs. 200 Lakhs, the guarantee cover is reduced to 50%.
Tenure of Guarantee
The guarantee cover offered under the scheme is for the agreed tenure of the term loan or the composite credit. For working capital, the guarantee cover is for 5 years or a block of 5 years.
The following are the enterprises that are eligible for this scheme.
- New as well as existing Micro, Small and Medium enterprises who are engaged in the process of manufacturing activity.
Service activity except
- Retail trade
- Educational institutions
- Self-help groups
- Training institutions
- Selected NBFCs
The following banks are considered as eligible lenders.
- Schedules Commercial Banks, which can be either Public or Private Sector or a Foreign bank.
- Some Regional Rural Banks under the ‘Sustainable Viable’ classified by NABARD.
- There are 13 eligible lending institutions that are registered as MLIs of the TRUST. They are as follows.
- Public Sector Banks
- 21 Private Sector Banks
- 73 Regional Rural Banks
- 4 Foreign Banks
- Delhi Financial Corporation
- Kerala Financial Corporation
- Jammu & Kashmir Development Finance Corporation Ltd.
- Export-Import Bank of India
- The Tamil Nadu Industrial Investment Corporation Ltd.
- National Small Industries Corporation (NSIC), North Eastern Development Finance Corporation (NEDFI)
- Small Industries Development Bank of India (SIDBI)
Scheme Awareness Programmes
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has chosen a multi-channel approach for creating awareness of the CGS amidst banks, MSE industry associations, MSE sector, etc. This is carried out through print and press media, by conducting workshops and seminars, attending programmes that are organized in various district/ state/ national fora, etc. CGTMSE has participated in various seminars and workshops that are organized by MLIs and Industry Associations, exhibitions and meetings that are regulated by RBI/ Government, that are related to the MSE sector, across the country to create awareness about CGS. The CSTMSE officials have also held business development meetings with its Member Lending Institutions. There have been print media campaigns that have been carried out across the country throughout the year to improve visibility and in creating awareness about the scheme. Among the stakeholders, there have been information dissemination campaigns to inform them about the scheme.
In addition to this, CGTMSE has participated in 21 seminars, workshops, bankers’ meet, business development meetings, and has also made presentations to create awareness among the bank officials and small enterprises on various aspects of the Credit Guarantee Scheme. The workshops and the programmes are generally arranged by the member banks, SIDBI/ CGTMSE/ Industry Associations, etc.
Here are the steps to enrol to this scheme.
Step 1: Prepare a Business Plan
A proper business plan has to be prepared including all the details of the financial and otherwise. The business model should explain the viability of the project.
Step 2: Choosing the Lender Bank
Once the business model is constructed, an appropriate lender bank has to be chosen.
Step 3: Submit the Application
After selecting the bank, the application along business model has to be submitted to the bank.
Step 4: Verification of the Details
The bank checks and verifies the details given in the application and the project model.
Step 5: Releasing Funds
After the verification process, the bank transfers the application to the CGTMSE where the application will undergo further verification. Once approved, the bank releases funds for the business.
Step 6: Fee Payment
After the approval, the borrowers have to pay the CGTMSE guarantee and service fee.