I welcome Union Finance Minister Nirmala Sitharaman’s announcement revamping the credit guarantee scheme under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) with the infusion of Rs 9,000 crore in the corpus, effective April 1, 2023.
The augmentation of corpus by the Govt. of India by increasing the committed corpus of the Trust from present Rs 7,500 crore to Rs 16,500 crore could be viewed as acknowledgment of the contribution of the Trust to the growth of MSEs. The additional corpus would help the Trust in deleveraging its present position and introduced major policy changes in the credit guarantee products and processes as desired by the Government for financial inclusion.
“The infusion of Rs 9,000 crore would help CGTMSE to introduce major policy changes”
The corpus support shall enable revamp of Credit Guarantee Scheme to further facilitate financial inclusion by covering large number of MSEs serving un-served and under-served areas. Expanding the coverage of the CGS to cover MSE Retail Trade segment, Wholesale Trade, Educational Institutions, allowing loans with Partial Collateral Security, Fee Reduction and increase in extent of coverage are some of the key changes already introduced in the Scheme making the scheme more attractive to the MLIs and thus enabling increased credit flow to the MSE Sector.
MFIs, Cooperative Banks, New Age Fintech NBFCs play a crucial role in providing small loans and other financial services to poor and low-income households. Accordingly, in order to extend the benefit of the CGS to the bottom of pyramid and to support financial inclusion, NBFCs, Small Finance Banks, Cooperative Banks, MFIs etc. having suitable wider network were included as MLIs of CGTMSE with a view to expand the reach of the scheme.
More importantly, CGTMSE has already introduced new guarantee fee structure with significant reduction in the fee from peak rate of 2% to 1.2% focused to bring down the overall cost of borrowing to MSEs, thereby increasing credit flow & encouraging entrepreneurship. The corpus augmentation would further result in reduction in guarantee fee to bring down the overall cost of borrowing and enabling credit to the economically underprivileged sections of the society.
As part of its approach to financial inclusion, CGTMSE has taken a slew of initiatives. The guarantee fee for weaker section of the societies viz. Women / SC/ST/ PwD has been reduced as compared to other segment while increasing the coverage limit. Such relaxation to Women Entrepreneur in terms of fee reduction and increased extent of coverage would act as a tool for the empowerment of women. Likewise, inclusion of MFIs, which are important players for credit dissemination to marginalised section of the society, especially women, will further help in robust credit flow to the bottom of the pyramid as well as to the missing middle. We are also exploring developing a Scheme for enterprise creation for budding entrepreneur.
CGTMSE’s Role in Financial Inclusion
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was set up in July 2000 jointly by Ministry of Micro, Small and Medium Enterprises (MSME), Government of India and SIDBI with initial corpus of Rs 2,500 crore jointly contributed by Ministry of MSME and SIDBI.
- Its main objective is to strengthen the credit delivery system and to facilitate the flow of credit to the MSE sector without the hassles of collateral and third-party guarantee. CGTMSE facilitates access to finance for un-served and under-served geographies, making availability of finance from conventional lenders to new generation entrepreneurs and under privileged who lack supporting their loan proposal with collateral security and/or third party guarantee.
- Credit Guarantee is given to the Member Lending Institutions (MLIs) for loans up to Rs 200 lakh granted to MSE without collateral and third-party guarantee.
- Presently, CGTMSE is operating 5 schemes viz; Scheme for Banks (CGS -I); Scheme for NBFC (CGS -II); Credit Guarantee Scheme for Co-Lending; Scheme for Subordinate Debt (CGSSD) for revival of stressed assets/ NPAs and Scheme for PM Street Vendor’s AtmaNirbhar Nidhi (PM SVANidhi) under Ministry of Housing and Urban Affairs.
- After touching the highest ever guarantee approval level of Rs 56,172 crore during FY 21-22, CGTMSE has approved guarantee more than Rs 80,000 crore for current FY indicating a growth of 90% during corresponding period. Similarly, it has already covered about 8.50 lakh units under guarantee Scheme during the April-December 2022, as against 7.17 lakh units during FY 2021-22.
- CGTMSE in its 22 years of Journey has covered more than 67 lakh guarantees amounting to over ₹3.86 lakh crore.
— Mr. Sandeep Varma
Chief Executive Officer
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
(Setup by Ministry of MSME, Govt. of India & SIDBI)
