CGT for Micro and Small Enterprises
Introduction of CGT for Micro and Small Enterprises
CGT for Micro and Small Enterprises was constituted by the central govt. and SIDBI for providing collateral-free loans to micro and small enterprises coming new and old both. With an increased and dedicated focus on MSE lending, CGTMSE has undergone transformative reforms since 2017. To expand the scope of its schemes to uncovered segments like Partial collateralized loans, Retail Trade, and amongst uncovered lenders like NBFCs and Small Finance Banks and Scheduled Co-Operative banks. CGTMSE has leveraged technology to achieve this scale and the entire operations are carried out online including NPA marking and claim settlements. It’s the trust’s constant endeavor to keep its technology upgraded for enhanced efficiency and better customer services and satisfaction.
At present, the main problems facing Micro and Small enterprises are one of the most important that is the non-availability of timely and adequate loans at a reasonable interest rate by Banks/Financial Institutions/NBFC to the MSE to face all problems. A major reason for the low availability of bank finance to the sector is the high-risk perception of banks in lending to MSEs and the urge for collators not readily available with these enterprises. The problem is more serious for micro-enterprises than for small enterprises and first-generation entrepreneurs. For solving these problems, India govt. has framed a CGT for Micro and Small Enterprises.
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To provide collateral-free loans to the MSE sector, the government of India has launched a scheme named CGT for Micro and Small Enterprises as CGTMSE. Both existing and new enterprises are eligible to come under this scheme. Ministry of Micro, Small and Medium Enterprises, Government of India, and Small Industries Development Bank (SIDBI) have named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). The CGTMSE was formed by GOI and SIDBI on 30 august 1990 for MSE. GCSE’s fund is being contributed by the Government of India and SIDBI in the ratio of 4:1 respectively and includes Rs. 2477.78 crores to the Corpus of the Trust as of 31 May 2016. The corpus increased to Rs.2500 crore by the end of the eleventh plan whereas it was announced in the package for MSE.
Eligible Lending Institutions for CGT for Micro and Small Enterprises
Banks / Financial Institutions, which are eligible under this scheme, is Scheduled Commercial Banks (Public Sector Banks / Private Sector Banks / Foreign Banks) and selected Regional Rural Banks (called ‘Sustainable Viable Category classified by NABARD ). As of May 31, 2016, there were 133 qualified lending institutions registered as MLIs of the trust, including 26 public sector banks, 21 private sector banks, 73 regional rural banks (RRBs), 4 foreign banks, and 9 other institutions.
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Qualified credit facilities
Up to Rs. 100 lakhs per loan unit covered under the scheme to facilitate loans and/or working capital for a new or existing micro and small enterprise, without any collateral security and/or third-party guarantee. Credit Facility For those units covered under the guarantor, which may be sick due to factors beyond the control of management, extended rehabilitation assistance by the lender may also be covered under the guarantee scheme. Risks are additionally covered under a scheme operated by the government or other agencies, which will not be eligible for coverage under the scheme.
Guarantee cover under CGT for Micro and Small Enterprises
The guarantee cover available under the scheme is up to a maximum of 85% of the sanctioned amount of credit facility. Guarantee cover is up to 75% of the loan facility up to 50 lakhs (85% for loans up to Rs. 5 lakhs provided to micro-enterprises, 80% for all owned/operated by women and operated by MSEs)) of the entire amount. With a uniform guarantee at 50% if the credit risk exceeds Rs 50 lakh and up to Rs 100 lakh. In the case of default, the trust claims 75% (or 85% / 80% / 50% wherever applicable) of the credit facility’s e amount in the credit facility extended by the lending institution.
For this purpose, the amount of default is given as the outstanding principal amount in the borrower’s account. In relation to the term loan, and the amount of the outstanding working capital facilities, including interest, on the date of non-account operation of the property. (NPA).
Tenure of guarantee under CGT for Micro and Small Enterprises
Guarantee cover under the scheme is for the agreed tenure of term loan / composite credit. In the case of working capital, the guarantee cover is 5 years or a block of 5 years.
Guarantee fee for covering
An overall all-in annual guarantee fee is 1.0% pa. Approved loan facility (0.75% for loan facility up to Rs.5 lakhs. 0.85% for loans above Rs.5 lakhs. Women, micro-enterprises in NER including Sikkim And up to 100 lakhs for units) is now being charged.
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Scheme Awareness Programmes for CGT for Micro and Small Enterprises
CGTMSE has also taken part in creating programs for CGS awareness among banks, MSE industry associations, MSE sector, etc. through print and press media, conduct workshops/seminars, participate in programs organized in various district/state / national INA. -Channel approach is adopted. During the year, CGTMSE participated in various seminars/workshops. The meetings organized by MLI and industry associations, RBI / Government. In relation to the MSE sector across the country to create awareness about CGS. CGTMSE officials held business development meetings with their member lending institutions. Continuous print media campaigns were conducted across the country to improve visibility and create awareness about the scheme. Information dissemination campaigns were carried out strictly among various stakeholders.
As of 31 May 2016, cumulatively 24,31,490 proposals from micro and small enterprises have been approved for guarantee cover for a total loan of Rs 1,13,500.61 crore, extended by 119 active MLIs.
A year-wise guarantee approved growth position is indicated in the table below:
|Period||No. of Active MLIs||No. of Credit Facilities Approved||Amount of Guarantees Approved (Rs. Crore)||Cumulative Guarantees Approved (Rs. Crore)|
|FY 2016-17 *||119||106634||4037.07||113500.61|
|*As up to 31 May 2016|
courtesy MSME govt of India.