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A special protection is given to the Micro, Small and Medium enterprises via the MSME Act, 2006. These are small-scale industries which require immunity and special protection to flourish. These industries form the very backbone of our Indian Economy. One of the government-sponsored schemes for MSMEs is the CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises). In this article, we will learn more about this fund.
The whole idea behind this trust is to provide financial assistance to these industries without any third party guarantee/ or collateral. These schemes provide the assurance to the lenders that in case of default by them a guarantee cover will be provided by trust in the ratio of 50/75/80/85 percent of the amount so given. The objectives of this fund are:
As per this scheme, a loan of up to Rs. 200 lakhs can be given to MSMEs. A special preference is given to the women entrepreneurs who are eligible for this scheme. Loans are also provided to borrowers who are located in the Northeastern States of India including Sikkim and Jammu and Kashmir.
The fees charged by the trust fund is a percentage of 1% p.a of the amount so sanctioned:
The credit guarantee available under this scheme is 75/80% of the amount so given to a maximum cap of Rs. 62.5 Lakh / 65 Lakh for a credit facility of up to Rs. 50 Lakhs. The percentage guarantee is 85% for micro-enterprises for a sum of up to Rs. 5 lakhs. The percentage of guarantee is 50% of the amount so sanctioned for a credit of above Rs. 50 Lakhs with a maximum limit of Rs. 100 Lakhs. The tenure of the guarantee is a block of 5 years.
The extent of cover is up to 80% for –
In case of default, the trust will settle the claim up to 75% or 80% of the amount no repaid up to the limit cap of Rs. 50 Lakhs. For the amounts above Rs. 50 Lakhs to Rs. 200 Lakhs the guarantee cover is reduce to 50%.
The enterprises which are eligible for this scheme are : New as well as existing Micro, Small and Medium enterprises who are engaged in the process of;
a. manufacturing activity
b. service activity, except:
i. Retail Trade
ii. Educational Institutions
iii. Self Help Groups
iv. Training Institutions.
It is now available for selected NBFC’s also.
The banks which can work as eligible lenders are:
a. 26 Public Sector Banks
b. 21 Private Sector Banks
c. 73 Regional Rural Banks
d. 4 Foreign Banks
e. Delhi Financial Corporation
f. Kerala Financial Corporation
g. Jammu & Kashmir Development Finance Corporation Ltd.
h. Export-Import Bank of India
i. The Tamil Nadu Industrial Investment Corporation Ltd.
j. National Small Industries Corporation (NSIC), North Eastern Development Finance Corporation (NEDFI)
k. Small Industries Development Bank of India (SIDBI)
The procedure to opt for this scheme is explained below:
After the approval comes through the business will have to pay the borrowers will have to pay the CGTMSE guarantee and service fee.