The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a scheme launched by the Ministry of MSME and SIDBI in 2000 to provide collateral-free loans to micro and small enterprises (MSEs). The scheme aims to enhance the credit flow to the MSE sector by providing credit guarantee support to the lenders.
According to the Ministry of MSME, the CGTMSE has achieved a significant milestone of surpassing Rs 1.50 lakh crore worth of guaranteed amount in the current financial year 2023-24, as compared to Rs 1.04 lakh crore in 2022-23, registering a sharp increase of 50% . This reflects the growing adoption of the scheme by the MSEs and the lenders, especially in the wake of the Covid-19 pandemic.
The CGTMSE offers various benefits to the MSEs, such as:
- Eligibility for loans up to Rs 500 lakhs without any collateral or third-party guarantee.
- Coverage of up to 85% of the credit facility for loans up to Rs 5 lakhs and up to 75% for loans above Rs 5 lakhs.
- Reduction in guarantee fee from 1.5% to 0.75% for loans up to Rs 2 lakhs and from 1.5% to 1.25% for loans above Rs 2 lakhs.
- Relaxation in claim settlement norms and digitisation of operations for ease of doing business.
The CGTMSE is expected to boost the growth and competitiveness of the MSE sector, which contributes significantly to the GDP, employment and exports of the country. The scheme also aims to promote entrepreneurship and innovation among the MSEs, especially in the social categories such as women, SC/ST, minorities, etc.