CGTMSE Scheme: Increasing Credit Access for MSMEs with a Guarantee of 2 Lakh Cr

In the FY 2023-24 Union Budget, the CGTMSE Scheme received an additional corpus support of 9,000 crore to revamp the scheme, which will provide a guarantee for an additional 2 lakh crore to MSME

Why is the scheme making headlines?

The restructured CGTMSE Scheme was recently launched in Mumbai by Shri Narayan Rane, Union Minister for MSME. The FY 2023–24 Union Budget included an additional 9,000 crores in corpus support for the CGTMSE Scheme, which will be updated and offer a guarantee for an additional 2 lakh crore to Micro & Small Enterprises.

Ministry of Micro, Small, and Medium Enterprises (MSME)

Year of Inception: 2000

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is the implementing body.

Objectives include: – The Credit Guarantee Scheme (CGS) was established with the primary goal of improving the credit delivery system and facilitating the flow of credit to the Micro and Small Enterprises (MSE) sector. The scheme aimed to provide access to finance for those who were unserved, underserved, or underprivileged, as well as to make traditional lenders’ funds available to the next generation of entrepreneurs.

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Beneficiaries include the Micro, Small, and Medium Enterprise (MSME) industry.

eligibility requirements:

Without requiring any collateral security or third-party guarantees, the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) offers guarantee coverage to credit facilities sanctioned up to Rs. 200 lakhs to all new and existing micro and small enterprises, both in the manufacturing and services sectors, with the exception of educational and training institutions.

Recently, CGTMSE unveiled a modified plan that consists of a Hybrid Security product. This enables the credit guarantee scheme (CGS) of CGTMSE Scheme to provide coverage for loans approved to MSE units with partial collateral coverage. A portion of the loan that is not secured by collateral may, under this scheme, be covered under CGTMSE up to a maximum of Rs 2.00 Cr.

With a maximum exposure limit of Rs 1.00 Cr, CGTMSE covers retail trade activities.

Exclusion criteria: Agricultural loans and Self Help Groups (SHGs) are not eligible for coverage under the CGTMSE.

Charges are used to fund the project. Loans have an annual guarantee fee.

Allocation of funds: Rs 9,000 crore.