Description
Ministry of Micro, Small and Medium Enterprises and Small Industries Development Bank of India (SIDBI) jointly established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in order to implement Credit Guarantee Scheme for Micro and Small Enterprises. The corpus of CGTMSE is contributed by Government of India and SIDBI. 75% of the loan amount to the bank is guaranteed by the Trust Fund.
Credit facilities eligible under the Scheme
- The Trust shall cover credit facilities (Fund based and/or Non fund based) extended by Member Lending Institution(s) to a single eligible borrower in the Micro and Small Enterprises sector for credit facility (i) not exceeding Rs. 50 lakh (Regional Rural Banks/Financial Institutions) and (ii) not exceeding Rs.100 lakh (Scheduled Commercial Banks and select Financial Institutions) by way of term loan and/or working capital facilities on or after entering into an agreement with the Trust, without any collateral security and\or third party guarantees or such amount as may be decided by the Trust from time to time.
- Provided that the lending institution applies for guarantee cover in respect of credit proposals sanctioned in the quarter April-June, July-September, October-December and January-March prior to expiry of the following quarter viz. July-September, October-December, January-March and April-June respectively
Provided further that, as on the material date
- The dues to the lending institution have not become bad or doubtful of recovery; and / or
- The business or activity of the borrower for which the credit facility was granted has not ceased; and / or
- The credit facility has not wholly or partly been utilised for adjustment of any debts deemed bad or doubtful of recovery, without obtaining a prior consent in this regard from the Trust.
- Credit facilities extended by more than one bank and/or financial institution jointly and/or separately to eligible borrower upto a maximum upto Rs.100 lakh per borrower subject to ceiling amount of individual MLI or such amount as may be specified by the Trust.
Credit facilities not eligible under the Scheme
The following credit facilities shall not be eligible for being guaranteed under the Scheme: –
- Any credit facility in respect of which risks are additionally covered under a scheme operated / administered by Deposit Insurance and Credit Guarantee Corporation or the Reserve Bank of India, to the extent they are so covered.
- Any credit facility in respect of which risks are additionally covered by Government or by any general insurer or any other person or association of persons carrying on the business of insurance, guarantee or indemnity, to the extent they are so covered.
- Any credit facility, which does not conform to, or is in any way inconsistent with, the provisions of any law, or with any directives or instructions issued by the Central Government or the Reserve Bank of India, which may, for the time being, be in force.
- Any credit facility granted to any borrower, who has availed himself of any other credit facility covered under this scheme or under the schemes mentioned in clause (1), (2) and (3) above, and where the lending institution has invoked the guarantee provided by the Trust or under the schemes mentioned in clause (i), (ii) and (iii) above, but has not repaid any portion of the amount due to the Trust or under the schemes mentioned in clause (1), (2) and (3) above, as the case may be, by reason of any default on the part of the borrower in respect of that credit facility.
- Any credit facility which has been sanctioned by the lending institution against collateral security and / or third party guarantee.
- Any credit facility which has been sanctioned by the lending institution with interest rate more than 3% over the Prime Lending Rate (PLR) of the lending institution.
Nature of assistance
The Trust shall provide guarantee as under :
Category | Maximum extent of Guarantee where credit facility is | ||
Upto Rs.5 lakh | Above Rs.5 lakh upto Rs.50 lakh | Above Rs.50 lakh upto Rs.100 lakh | |
Micro Enterprises | 85% of the amount in default subject to a maximum of Rs.4.25 lakh | 75% / Rs.37.50 lakh | Rs.37.50 lakh plus 50% of amount in default above Rs.50 lakh subject to overall ceiling of Rs.62.50 lakh |
Women entrepreneurs/ Units located in North East Region (incl. Sikkim) other than credit facility upto Rs.5 lakh to micro enterprises | 80% of the amount in default subject to a maximum of Rs.40 lakh | Rs.40 lakh plus 50% of amount in default above Rs.50 lakh subject to overall ceiling of Rs.65 lakh | |
All other category of borrowers | 75% / Rs.37.50 lakh | Rs.37.50 lakh plus 50% of amount in default above Rs.50 lakh subject to overall ceiling of Rs.62.50 lakh | |
- All proposals for sanction of guarantee approvals for credit facilities above Rs. 50 lakh and upto Rs.100 lakh will have to be rated internally by the MLI and should be of investment grade. Proposals approved by the MLIs on or after December 8, 2008 will be eligible for the coverage upto Rs.100 lakh.
- The guarantee cover will commence from the date of payment of guarantee fee and shall run through the agreed tenure of the term credit in respect of term credit / composite credit. Where working capital alone is extended to the eligible borrower, the guarantee cover shall be for a period of 5 years or a block of 5 years, or for such period as may be specified by the trust in this behalf.