CGTMSE - Credit Guarantee Fund Trust for Micro and Small Enterprises

CGTMSE Eligibility Criteria

Any existing or new Micro and Small Enterprises that are engaged in service activities or manufacturing activities are eligible for the Trust. The only exemption is for Micro and Small Enterprises that are engaged in sectors such as Self Help Groups, educational institutions, training institutions, and agriculture.

The list of member lending institutions and banks from which credit can be availed can be found on the official website of the Credit Guarantee Fund Trust for Micro and Small Enterprises, otherwise called UDAAN.

Highlights of CGTMSE operations

There have been 24,31,490 proposals that have been made by MSEs, which have been approved for guarantee cover with credit facilities of Rs.1,13,500 crore in total as of 31 May 2016. The below-mentioned table shows the yearly-wise guaranteed approval that has been given:

Awareness programmes conducted by the scheme

At various national/state/district fora etc., different programmes are organised by CGT-MSE. The scheme conducts workshops or seminars with the aim of creating awareness of the CGS among the MSE sector, MSE industry associations, banks, etc.

Lending institutions that are eligible

Given below is the list of financial institutions and banks that are eligible under the scheme:

1. Scheduled Commercial Banks (Foreign Banks, Private Sector Banks, and Public Sector Banks)
2. Certain Regional Rural Banks (Banks that have been classified by National Bank for Agriculture and Rural Development (NABARD) in the category of 'Sustainable Viable').

Under the trust, there were 133 eligible lending institutions that were registered as Member Lending Institutions as of 31 May 2016. The trust consisted of 4 Foreign Banks, 73 Regional Rural Banks, 21 Private Sector Banks, 26 Public Sector Banks, and 9 other institutions (SIDBI, North Eastern Development Finance Corporation (NEDFi), National Small Industries Corporation (NSIC), The Tamil Nadu Industrial Investment Corporation Ltd., Export Import Bank of India, Andhra Pradesh State Financial Corporation, Jammu & Kashmir Development Finance Corporation Ltd., Kerala Financial Corporation, and Delhi Financial Corporation).

Eligible credit Facilities

Existing or new micro and small enterprises are eligible for both the working capital facility and/or term loans of Rs.100 lakh per borrowing unit under this scheme as a credit facility. Micro and small enterprises need not provide security and collateral in order to avail credit facilities as well. In case the units that are offered coverage under the guarantee scheme, have become sick and cannot be controlled by the management, then rehabilitation assistance will also be provided by the lender. Any additional risks that are provided under the scheme and are operated by other agencies or the Government - will not be provided with any coverage under the scheme.

Cover tenure

Under the scheme, for term loans or composite credit, a guarantee cover is provided for the agreed tenure. Guarantee cover is for 5 years or for a block of 5 years in the case of working capital under the scheme.

Amount of guarantee cover

Up to a maximum of 85% of the amount that has been sanctioned can be provided as guarantee cover as per the scheme. In case the credit facility is Rs.50 lakh, the guarantee cover is 75%. The guarantee cover is 85% for loans up to Rs.5 lakh that has been provided to micro enterprises and 80% for all loans that have been provided to NER (including Sikkim) and MSEs that are owned or operated by women. The guarantee cover is 50% for any credit facility between Rs.50 lakh and Rs.100 lakh.

The Trust will settle claims of up to 50%, 75%, 80%, and 85%, depending on the type of guarantee cover in case of any defaults. Therefore, in case of term loans, the amount of default is considered as the principal amount pending and in case of working capital, it is the number of working capital facilities that are outstanding plus the interest rate. The date when the amount is considered is when the account turns into a Non-Performing Asset (NPA).

The fee that is charged for a guarantee

The annual guarantee fee that is charged now is 1.0% p.a. However, for amounts up to Rs.5 lakh, it is 0.75% and any amounts between Rs.5 lakh and Rs.100 lakh that have been provided to units in NER including Sikkim, Micro Enterprises, and women, the interest rate is 0.85%.

Documents Required to Apply for Loan under CGTMSE Scheme  

The documentation needed to avail a loan under the CGTMSE Scheme, and its coverage is listed below: 

1. Duly filled CGTMSE loan application 
2. Business Project Report 
3. Copy of the bank's loan approval 
4. Passport-sized photographs 

1. Business Incorporation/Company Registration Certificate 
2. CGTMSE Loan Coverage Letter 

How to Avail Business/MSME Loan under CGTMSE Scheme 

The following steps must be followed to apply for loans through the CGTMSE: 

Step 1: Creating the business entity: - 

The borrower must incorporate a private limited company, one-person company, proprietorship, limited liability partnership, in accordance with the nature of the business. They should also get the necessary approvals and tax registrations to carry out the project. 

Step 2: Making a business report: - 

The preparation of a business plan by borrowers, which must include pertinent details like the business model, expected financials, promoter profile, etc., and a market analysis, is required. After presenting the report to the credit facility, a request for a loan under the CGTMSE scheme is made. Businesses should take into account the fact that such project reports are best created by qualified experts. This will raise the likelihood of approval. 

Step 3: Approval of the loan: - 

Credit terms and working capital facilities are typically included in a bank loan request. Banks carefully examine the viability of the business model after receiving the application and business plan. The application is processed, and the loan is granted according to the policy of the bank. 

Step 4: Receiving the Guarantee Cover: - 

The bank applies to the CGTMSE authority and receives the guarantee cover after the loan is granted. The borrower is liable for paying the guarantee fee and service fees if the CGTMSE approves the loan. You can download the CGTMSE loan application form from its official website. 

There is an 18-month lock-in period after the final loan amount has been disbursed for a preferred claim. Once the defaulted account is designated as an NPA, the lender must prefer a claim. The CGTMSE claim settlement process is the beginning of the recovery proceedings after the account is declared an NPA. 

CGTMSE Contact Details 

The Head / Registered Office - 

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) 1st Floor, SIDBI, Swavalamban Bhavan, C-11, G-Block, BKC, Bandra (East), Mumbai - 400 051 

 Contact Number: (022) 6722 1553, 6722 1438, 6722 1483 

Toll-free Number: 1800222659/ (022) - 6722 1553