Credit Guarantee Fund Trust for Micro, Small & Medium Enterprises

CGTMSE - Establishment

• GOI and SIDBI set up the Scheme called Credit Guarantee Fund Scheme for Small Industries (CGFSI) which came into effect from 01st Aug’ 2000 based upon  recommendation of S.L.Kapur Committee.
• Subsequent to enactment of MSMED Act-2006 the Trust was renamed as Credit Guarantee Fund Trust for Micro and Small Enterprises and scheme called as Credit Guarantee Scheme for Micro and Small Enterprises (CGSMSE).

Purpose & Coverage

Banks face two major hurdles  in smooth credit off-take to the Micro & Small Enterprises: 

• Inability of entrepreneurs to provide collateral security and/or third party guarantee, and
• Low recovery rate faced by the lending institutions. 

To address this problem, CGTMSE gives guarantee to banks that in case of default by a Micro & Small Enterprises borrower, CGTMSE would compensate the concerned bank upto a specified amount. The details of Credit Facilities Coverage to different financial institutions is given below:-

Schemes Eligible under CGTMSE

• Laghu Udyami Credit Card (LUCC)
• Artisan Credit Card (ACC)
• Prime Minister’s Employment Generation Programme (PMEGP)
• Advances to  SRWTOs, SB, Professionals and Self-Employed
• Loans under Technology Upgradation Fund Scheme for Textile Units (TUFS)
• Swarozgar Credit Card Scheme (SCC)
• Udyog Mitra Scheme
• Mahila Pragati Dhara
• Doctor Scheme
• Commercial Vehicle Scheme
• Composite Loans to MSEs
•  Scheme for financing Handloom Weavers’ Groups   (HWGs)
• Loans under Credit Linked Capital subsidy
• Scheme for Technology Upgradation.
• Channel Financing
• Scheme for Food Processing Industries
• Scheme on Trade Related Entrepreneurship Assistance and Development (TREAD) for Women
• Rejuvenation, Modernization and Technology Upgradation Scheme (REMOT) of the Coir Industry.

Credit facilities eligible under the Scheme

CGTMSE provides coverage for such loan accounts where:- 

• Credit facility is standard and regular (not SMA)
• Business / activity of the borrower for which the credit facility was granted has not ceased; 
• Credit facility has not wholly or partly been utilized for adjustment of any debt deemed bad or doubtful of recovery, without obtaining a prior consent in this regard from the Trust.

Quantum of Guarantee Cover

Annual Guarantee Fees (AGF)

Annual Guarantee Fee (AGF) Structure – Standard Rate (SR)

• Fees to be paid within 30 days from date of generation of CGPAN or first disbursement, whichever is later.  (Guarantee cover start date will be the date of credit of AGF in Trust Account)
• AGF will be charged on the guaranteed amount for the first year and on the O/s amount for the remaining tenure of the credit facility instead of sanctioned limits. (TL – O/s as on 31-Dec, WC- Peak Level O/s in Calendar year)
• Introduction of Risk based fees w.e.f. 01.04.2016 based upon NPA % and Claim Payout Ratio of the respective Member Lending Institutions.

NPA%= Guaranteed amount of the corresponding NPA accounts / Cumulative guarantees issued by the Trust

Claim Payout Ratio= Cumulative claims settled by Trust / Cumulative receipts by Trust (i.e. Fees + recoveries by MLI) 

Important Points

Refund of Annual Guarantee Fee

Annual Guarantee Fee once paid will be refunded only when closure is marked in CGTMSE system within 3 months from date receipt of fee by CGTMSE

Revival of Closed Accounts:

Any credit facility where guarantee coverage has lapsed due to non payment of guarantee fee or any other reasons, the CGTMSE coverage can be revived subject to following conditions:-

• The concerned lending institution should request for revival within next financial year
• Account to be standard and regular
• Account should not turn NPA within 180 days of revival
• Penal interest @4% over Bank Rate has to be paid for the lapsed period
• Additional Risk Premium @15% of Standard rate has to be paid

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