Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)

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Overview

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a government initiative in India that offers credit guarantees to financial institutions, encouraging them to provide collateral-free loans to micro and small enterprises (MSEs).

The CGTMSE serves as a guarantor for loans issued by banks and other eligible lending institutions, helping to reduce the risk for lenders. This enables MSEs to secure credit without the requirement for collateral or third-party guarantees, supporting their growth and development.

Under the CGTMSE scheme, eligible MSEs can obtain loans up to a specified limit (currently up to Rs. 5 crores) from participating lending institutions. The CGTMSE offers a guarantee cover on the portion of the loan amount at risk, reducing the lender’s exposure. If the MSE borrower defaults, the CGTMSE compensates the lending institution to a certain extent, based on the provided guarantee cover.

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Eligibility Criteria

Loan Amount

Under the CGTMSE scheme, MSEs can access loans up to a limit of Rs. 5 crores. The actual loan amount may vary based on the lending institution’s policies and the borrower’s creditworthiness.

Enterprise classification

The scheme applies to micro and small enterprises (MSEs) as defined in the Micro, Small, and Medium Enterprises Development (MSMED) Act, 2006.

Providing Guarantee

Although CGTMSE offers a credit guarantee to the lending institution, the borrower remains responsible for repaying the loan. The guarantee is activated only if the borrower defaults.

Nature of activities

The scheme encompasses a broad range of activities, including manufacturing, services, and related sectors. Eligible industries include manufacturing, trading, services, agriculture, and other specified activities.

Benefits

Entrepreneurial promotion

CGTMSE also backs the Stand-Up India Scheme, which encourages entrepreneurship among women and individuals from disadvantaged communities

Expanded loan size

The maximum loan limit under the CGTMSE scheme is currently set at Rs. 2 crores. This higher loan amount enables MSEs to access larger credit facilities, aiding their growth and expansion efforts.

Collateral - Free Loans

The CGTMSE scheme currently offers a maximum loan limit of Rs. 2 crores. This higher loan amount enables MSEs to obtain larger credit facilities, helping to fuel their growth and expansion..

Easier access to finance

CGTMSE also collaborates with the Stand-Up India Scheme, which fosters entrepreneurship among women and individuals from underrepresented communities.