CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL ENTERPRISES (CGTMSE)

Introduction

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is jointly set up by Ministry of Micro, Small & Medium Enterprises (MSME), Government of India and Small Industries Development Bank of India (SIDBI) to catalyse flow of institutional credit to Micro & Small Enterprises (MSEs). Credit Guarantee Scheme (CGS) was launched to strengthen credit delivery system and to facilitate flow of credit to the MSE sector, create access to finance for unserved, under-served and underprivileged, making availability of finance from conventional lenders to new generation entrepreneurs. Over the past 20 years, CGTMSE has been instrumental in providing guarantee cover to collateral and/or third party guarantee free credit facilities extended by eligible Member Lending Institution [MLIs] to MSEs.














Eligibility Criteria

a) New and existing Micro and Small Enterprises engaged in manufacturing or service activity excluding Agriculture, Self Help Groups (SHGs), etc.

b) As of now, all activities that come under service sector as per MSMED Act, 2006 are eligible for coverage under the scheme.

c) Small road and water transport loans are eligible for guarantee cover.

d) Under the Guarantee Scheme, a borrower is required to obtain IT PAN number prior to availing of credit facility from the eligible lending institution. Also it is a mandatory requirement under section 139A(5) read with section 272(C) of the I.T Act 1961 to indicate IT PAN on all tax documents which include returns, challans, appeals, etc. However, in respect of loans up to  5 lakh, CGTMSE is presently not insisting that the IT PAN be obtained at the time of availing of the guarantee cover. IT Pan No. is to be indicated in respect of credit facility above  5 lakh. Nevertheless, the MLIs have been advised to inform their borrowers to apply for IT PAN number. It is desirable to indicate IT Pan No. in all the application irrespective of the amount. (Refer Circular no. 112).It is advisable to obtain Udyog Aadhaar Number of every borrower and feed it in the system at the time of submission of new application .

e) In case of existing units, additional credit facilities in the form of term loan or renewal of working capital facilities can be covered as and when the facilities are extended, provided no collateral security and/ or third party guarantee is obtained. Under the "Hybrid Security" product, the MLIs will be allowed to obtain collateral security for a part of the credit facility, whereas the remaining part of the credit facility, up to a maximum of  200 lakh, can be covered under Credit Guarantee Scheme of CGTMSE. CGTMSE will, however, have pari-passu charge on the primary security as well as on the collateral security provided by the borrower for the credit facility.

f) Credit facilities can be extended by more than one bank and/or financial institution jointly and/or separately to eligible borrower up to a maximum limit of  200 lakh per borrower subject to ceiling amount of individual MLI or such amount as may be specified by the Trust. However, sharing of securities will not be permitted.

h) Joint financing by a financial institution (e.g. SIDBI, NSIC, and NEDFi) and Commercial bank can be covered under the scheme. For e.g. MSE unit is financed by term loan from State financial institution and Working capital from a commercial bank. However, sharing of securities will not be permitted.

i) At present, as per the Scheme, the credit facility extended to Self Help Group cannot be covered.