CGTMSE - Credit Guarantee Fund Trust for Micro and Small Enterprises

The Government of India launched the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme to provide credit that was collateral free to the micro and small enterprise segment in India.

This is a trust formed by the Government of India, Small Industries Development Bank of India (SIDBI), and The Ministry of Micro, Small and Medium Enterprises, for the implementation of the Credit Guarantee Fund Scheme aimed at micro and small enterprises.

Features & Benefits of CGTMSE

These are the features and benefits of this trust:

  1. Existing and new enterprises can apply for the fund.
  2. Up to Rs.200 lakh of fund and non-fund based credit facilities are available for each eligible borrower provided they extend on the project viability without any third-party guarantee orcollateral security.
  3. From the sanctioned amount, guarantee cover of 50%/75%/80%, and 85% is available under the scheme.
  4. For retail trade activity, each MSME borrower can avail 50% of the sanctioned amount of the facility for credit that ranges from Rs.10 lakh to Rs.100 lakh.
  5. For any Micro and Small Enterprise owned by women, the guarantee cover is 80%.
  6. For credit up to Rs.50 lakh for loans and credits in the North East Region, the guarantee cover is 80%.
  7. In the case of any default by the enterprise of credit availed from lending institutions up to Rs.200 lakh, up to 75% of the default amount will be settled by the Trust.

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:

Financial Year Active MLIs Credit facilities that have been approved Amount of guarantees that have been sanctioned (Rs. in Crore) Cumulative guarantees that have been approved (Rs. in Crore)
2000-2001 9 951 6.06 6.06
2001-2002 16 2296 29.52 35.58
2002-2003 22 4955 58.67 94.25
2003-2004 29 6603 117.60 211.85
2004-2005 32 8451 267.46 538.62
2005-2006 36 16284 461.91 1,000.53
2006-2007 40 27457 704.53 1,705.06
2007-2008 47 30285 1,055.84 2,701.59
2008-2009 57 53708 2,199.40 4,824.34
2009-2010 85 151387 6,875.11 11,559.61
2010-2011 106 254000 12,589.22 23,846.01
2011-2012 109 243981 13,783.98 37,139.31
2012-2013 117 288537 16,062.48 52,600.07
2013-2014 117 348475 18,188.12 70,026.28
2014-2015 119 403422 21,274.82 90,445.90
2015-2016 119 513978 19,949.38 1,08,990.85
2016-2017 119 106634 4,037.07 1,13,500.61

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:

  • Scheduled Commercial Banks (Foreign Banks, Private Sector Banks, and Public Sector Banks)
  • 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, which have become sick and cannot be controlled by the management, then rehabilitation assistance will also be provided by the lender. Any additional risks which 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 have 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 principle 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%.

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