Credit Guarantee Fund Trust for Micro and Small Enterprises [CGTMSE]
(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).
Key Features of CGTMSE
Collateral-Free Loans: CGTMSE provides credit guarantees to banks and financial institutions for loans extended to MSEs without the requirement of collateral or third-party guarantee.
Coverage: MSEs across various sectors, including manufacturing and service industries, are eligible for coverage under the CGTMSE scheme.
Loan Amount: The maximum loan amount covered under CGTMSE varies based on the category of the enterprise (micro or small) and the nature of the business.
Coverage Ratio: CGTMSE typically covers a significant portion of the loan amount, ranging from 75% to 85% for different categories of MSEs.
Repayment Period: MSEs can avail of longer repayment periods, providing flexibility in managing loan repayments.
Risk Mitigation: By providing credit guarantees, CGTMSE mitigates the risk for banks and financial institutions, encouraging them to lend to MSEs with limited collateral or credit history.
Benefits of CGTMSE for MSEs
Access to Credit: CGTMSE facilitates access to finance for MSEs, enabling them to meet their working capital requirements, fund business expansion, and invest in infrastructure.
Collateral-Free Financing: MSEs can avail of loans without the need for tangible collateral, easing the burden of securing funding.
Reduced Risk: CGTMSE coverage reduces the risk for MSEs and encourages banks to lend to them, even in cases where traditional collateral may be lacking.
Promotion of Entrepreneurship: By supporting MSEs with credit guarantees, CGTMSE promotes entrepreneurship and fosters the growth of small businesses across various sectors.
CGTMSE plays a vital role in promoting the growth and development of MSEs in India by providing credit guarantees and facilitating access to finance. By encouraging banks and financial institutions to lend to MSEs without the requirement of collateral, CGTMSE supports entrepreneurship, fosters innovation, and contributes to economic development at the grassroots level.
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How does CGTMSE benefit MSEs?
CGTMSE provides credit guarantees to banks and financial institutions, enabling them to extend collateral-free loans to MSEs. This facilitates access to finance for MSEs, supporting their working capital needs, business expansion, and infrastructure development.
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Who is eligible for CGTMSE coverage?
MSEs engaged in manufacturing or service activities, including proprietary concerns, partnership firms, self-help groups, and cooperatives, are eligible for CGTMSE coverage.
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What is the maximum loan amount covered under CGTMSE?
The maximum loan amount covered under CGTMSE varies based on the category of the enterprise (micro or small) and the nature of the business. It typically ranges from ₹10 lakhs to ₹2 crores.
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Is collateral required for loans covered under CGTMSE?
No, loans covered under CGTMSE do not require tangible collateral. The scheme provides credit guarantees to banks and financial institutions, enabling them to lend to MSEs without the need for collateral.
