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Money
Credit Guarantee Scheme for MSMEs to cover loans upto Rs.100 lakhs
Feb 2009
Page 1 of 2
A robust and vibrant MSME sector is the backbone of a developing economy like India. Amongst the myriad problems faced by start ups and young entrepreneurs, credit remains the single most pertinent issue. More often than not entrepreneurs find themselves stranded due to the lack of timely credit at appropriate rates of interest.
The common hurdle faced in accessing credit comes from the obligation to provide a collateral security or a third party guarantee. In order to address this overbearing concern for credit the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was set up by the Government of India and SIDBI (Small Industries Development Bank of India) in August 2000. This is the only credit guarantee institution in the country exclusively set up for the benefit of entrepreneurs in the MSE sector. The CGS is beneficial both to the MLI as well as the MSE units.
The Credit Guarantee Trust Fund promises collateral free credit for SMEs. Under the scheme, CGTMSE extends guarantee for credit facility to upto Rs.1 crore sanctioned to its Member Lending Institutions (MLIs). SMEs, both in the manufacturing and the services sector, excluding retail trade will be the main beneficiaries.
Entrepreneurs in the MSME sector can contact any of the member lending institutions of CGTMSE. All public sector banks, major private sector banks and select RRBs (Regional Rural Banks) and financial institutions are registered as MLIs of CGTMSE.
Under the scheme the CGTMSE shall cover credit facilities (fund based and/or Non fund based)extended by Member Lending Institutions to a single eligible borrower in the Micro and Small Enterprises Sector for credit upto Rs. 50 lakh (Regional Rural Banks/Financial Institutions) and upto Rs. 1 crore (Scheduled Commercial Banks and select Financial Institutions). The credit extended will be by way of term loan and/or working capital facilities.
The lender should extend credit without any third party guarantee or a collateral security. The credit facility thus extended will carry zero percent risk weight/provision for the MLIs for the guaranteed portion.
SIDBI Chairman R.M. Malla, in his advise to the MLIs, says that these institutions should help create greater awareness about the Credit Guarantee Scheme amongst the potential target groups and endeavour to increase their collateral-free lending to the Micro and Small Enterprises (MSEs) sector. Stressing the importance of facilitating credit availability to enterprises set up by women and the young first generation entrepreneurs and those from the disadvantaged sections of the society, Malla observes,
“while generating profitable business for their respective institutions, MLIs would also be directly contributing to the economic growth and prosperity of the nation.”
The growing popularity of the scheme is reflected in the sharp increase in operations of the fund. There has been a considerable increase in the number of enterprises covered and the guarantee amount proved.
To be directly contributing to the economic growth and prosperity of the nation.”
The growing popularity of the scheme is reflected in the sharp increase in operations of the fund. There has been a considerable increase in the number of enterprises covered and the guarantee amount proved."
MLI Name & Operating Offices
1 ALLAHABAD BANK (51)
2 ANDHRA BANK (20)
3 ANDHRA PRAGATHI GRAMEENA BANK (6)
4 ARYAVART GRAMIN BANK (10)
5 AXIS BANK LIMITED (5)
3 Comments >>
ALPESH GANDHI
22 Sep 2011 (03:09:21)
We would like to register our member in Member Lending Institutions (MLIs). please guide us.
dipen Shah
24 Feb 2011 (07:30:18)
I am dealing in distribution of Financial Products like Insurance, MF, Equities etc. I want to grow my network. I want to know whether this scheme will be available to me.
G.Manohar Reddy
29 Jan 2011 (06:11:46)
iam a retailar business man how can i use this scheme iam already haveing a od with my bank of 40 lacks
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- Official Magazine Partners for several national & international MSME events.
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