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INTRODUCTION

As there are problems faced by the MSME’s with respect to the funding, keeping this problem in mind, our government of India has brought up an initiative to launch the Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGS) to provide security free loans to the micro and small enterprises. Both the prevailing and the new msme’s are qualified to be covered in the scheme. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a trust established by the government of India, Ministry of Msme’s and SIDBI (Small Industries Development Bank of India) for the purpose of implementation of Credit Guarantee Fund Scheme for SME’s and MSME’s.


DESCRIPTION

There is a prescribed eligibility criteria, eligible institution for obtaining the funds, eligible credit facilities etc. MSME’s were facing a lot of issues related to the funding and non-availability of the funds in a timely manner and also high rate of interest was charged by the financial institutions. To resolve this problem our government of India in consonance with the Ministry and other regulators and institutions has launched this scheme of the Credit Guarantee Fund Scheme. This is protection specifically for the MSME’s as they are the backbone of the Indian economy. Whatever loan facility is provided the trust charges the fees for the same amounting to 1% per annum of the credit sanctioned.

Benefits under the scheme

  • The eligible credit facilities are: providing the loan facilities of up to 200 lacs even to the entrepreneurs of Jammu and Kashmir, North-eastern states of India etc. either without collateral security or third party guarantee.
  • Providing of funds and composite credit schemes.
  • If the credit facility is up to 50 lakhs then credit guarantee is provided amounting to Rs. 75% or 80% of the credit to a maximum of 62.5 lakhs or 65 lakhs.
  • In case of default has been done by the borrower of the credit facilities extended by MLIs, then trust provides the guarantee of up to 50/ 75 / 80/ 85 % of the amount plus interest on such amount. Other penalty charges, service charges or any other dues are not covered under the guarantee.
  • Rehabilitation help is also provided by the lender (institution) but within the credit limit of 200 lacs for the units covered Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and becoming sick due to issues which are not in the control of management.
  • Special benefits provided to the women entrepreneurs who are running the MSME’s.

Eligible MSMe’s for the scheme

All the existing as well as new MSME’s providing the business as specified under this scheme like MSME’s engaged in the activity of manufacturing, retail trade, educational or training institution, service sector etc. Now prescribed NBFC’s can avail credit facility scheme. Only 75 percent of the fund is allowed to a maximum of Rs. 50 lakhs for the period of five years. And the eligible lenders are: All the Banks and Financial institutions, scheduled commercial banks and some regional rural banks which are Sustainable Viable as classified by NABARD, Private or public sector banks, Small Industries Development Bank of India (SIDBI) etc.


Procedure

All the MSME’s who are interested and eligible can approach the lender as mentioned above to avail and obtain the credit under the scheme. Interested MSME’s are requested to first get the full knowledge of the scheme and then approach to the eligible lenders for the funding.

  • The MSME’s must have their detailed business plan in which all the financial details and their project details are to be specified.

  • Once the business plan is prepared then the next step it to select the bank or institution from whom the credit is to be availed. Once it is decided from which bank the loan is to be obtained the application is required to be submitted to the chosen institution or banks as the case may be.

  • Now the bank will do the detail scrutiny of the business model of the msme thereby making the verification of the details mentioned in the application.

  • The last step is the verification to be done by the CGFTMSE Fund on the application made by the bank for the scrutiny again. If the verification is completed then the bank will be authorized to provide the credit facility for business model.


Non-Eligibility

The trust has the right to reject the application for the credit facility and guarantee cover on the grounds as mentioned in the scheme. MSME’s not engaged in manufacturing activity, services and retail trade, educational or training institution are not eligible to avail this facility and if any application is received from such msme’s then the application liable to be rejected by the trust as this is the first criteria which is to be fulfilled by the msme sector.

Documents Required

  • Annual reports for the previous 3 years.
  • List of offices along with their addresses to operate the Credit Guarantee scheme with CGTMSE.
  • Name and designation of the designated officers to operate the scheme along with their signatures.
  • Geographical Areas of operation is detail.
  • Loan requirement and loan size details.

Note: Items b) and c) above may be provided after the registration of the lending institution, if so allowed by the lending institution.

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FAQ's

Process made simpler by providing credit guarantee cover! The India’s most convenient trust for funding.

  • Are there any specific borrowers covered under the scheme?

    MSME’s engaged in the activity of manufacturing, retail trade, educational or training institutions, service sector etc.

  • Borrowers from all service sector enterprises are eligible under the Scheme?

    Yes, the activities falls under the services sector enterprises of the MSMED Act are covered under this scheme.

  • Loans given to Small Road and Land Transport Workers are eligible for coverage under the Scheme?

    Only road and water transport loans are covered under this scheme for guarantee cover.

  • To be an eligible borrower PAN is mandatory?

    Income Tax Pan number is obligatory to avail the credit facility. As it is mandatory to quote the PAN no. on all returns and tax documents as per the income tax Act. Nonetheless in the case of the loans amounting to Rs/- 5 lakhs only then the trust is not asking for the IT PAN at the time of availing credit facility. Therefore if the credit facility availed is above 5 lakhs then IT PAN is obligatory for submitting the application.

  • Can borrower be eligible to obtain credit facilities from a multiple institutions?

    Credit facilities can be obtained by one or more than financial institution jointly but the limit must not exceed 200 lacs.

  • Credit facility extended to self-help group is covered under the scheme?

    Yes credit facility is available to those MSME’S engaged in self-help groups.

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