Credit Guarantee Fund Trust for

Micro and Small Entreprises

(CGTMSE)
Presentation on Credit Guarantee Scheme

MSE as defined in MSMED Act 2006

Micro and Small Enterprises (MSE) in India

MSE is governed by the MSMED Act 2006
More than 26 million units Registered / Unregistered MSEs
Provide employment to more than 60 Million persons
Largest employment generating sector after agriculture
Employment potential at low capital cost
Constitute 95% of industrial units
Key contributors to national economy
45% of manufacturing output
40% of total exports
8% of Gross Domestic Product

Products of MSEs
Chemical &
Chemical
Products
22%

More than 6000 products

Basic Metal
Industry
12%
Metal Products
10%

Food products
36%
Others
6%

Electrical &
Machinery
Parts
8%
Rubber &
Plastics
Products
6%

CGTMSE Establishment & Corpus

Set up as a Trust in August, 2000 and administered by Board of

Trustees

Government of India and Small Industries Development Bank of

India (SIDBI) the settlors Contribution ratio 4 :1

Initial Corpus Rs.125 crore ; Present Corpus Rs.2158.79 crore ;

Committed Corpus Rs.2500 crore

Objectives of CGTMSE
Shift from collateral to merit based lending
Act as catalyst of entrepreneurship promotion
Facilitate institutional credit flow to MSE sector
Address growth constraints of MSE sector
Enable financial inclusion / employment generation

Revive confidence in credit guarantee mechanism

Credit Guarantee Scheme (CGS)

Salient Feature
Micro & Small Enterprises as per MSMED Act eligible
Both Manufacturing and Service sectors covered
Credit Facility up to Rs.100 lakh covered
All fund / non-fund based facility covered
Maximum Cover of up to 85% of credit facility
All credit facility must be extended without any collateral

security
Credit for retail trade, educational / training institutions and

SHGs are not eligible for coverage.

Extent of Guarantee cover

Borrower
Category

Micro Enterprises

Women Entrepreneur
/ units located in
North Eastern Region
(Incl. Sikkim)

All other category of

borrowers

Maximum Guarantee Cover, where

Credit facility is
Upto Rs.5lakh
85% of the amount
in default /
Rs.4.25lakh

Above
Rs.5lakh to
Rs.50lakh
75% of
amount in
default /
Rs.37.5lakh

80% of amount in Default / Rs.40

lakh

75% of amount in Default /

Rs.37.5lakh

Above Rs.50lakh to
Rs.100lakh
Rs.37.50lakh plus 50%
of amount in default
above Rs.50lakh /
Rs.62.50lakh
Rs.40lakh plus 50% of
amount in default
above Rs.50lakh /
Rs.65lakh
Rs.37.50lakh plus 50%
of amount in default
above Rs.50lakh /
Rs.62.50lakh

Facilitating Collateral-free Credit to Micro & Small Enterprises

CGS Tenure of Cover

Tenure of Guarantee Cover for Term Credit, Combined Working

Capital & Term Credit and Composite Credit is tenure of Term

Credit / Composite Credit or loan termination date, whichever
is earlier
Where Working Capital facility alone is covered, the tenure is

for a block of five years or loan termination date, whichever is

earlier. Thereafter, MLI should apply for renewal of Guarantee
Cover
If tenure of Term Loan is 3 years, tenure of working capital will

also be 3 years. After 3 years, if guarantee cover is to be

continued for working capital, application for renewal to be
lodged online
Facilitating Collateral-free Credit to Micro & Small Enterprises

CGS Application Lodgment

For credit facility sanctioned in a particular quarter, application for

Guarantee Cover should be lodged by the end of the next quarter

In case of Working Capital Credit, date of renewal / review /

enhancement can be taken as date of sanction

In case of credit facility secured by collateral, application can be

lodged after release of collateral, subject to time limits specified for

application lodgment
Account should not have become overdue / bad / doubtful of

recovery / adjusted for debts deemed bad or doubtful of recovery as

on date of application / payment of guarantee fee

Facilitating Collateral-free Credit to Micro & Small Enterprises

CGS Guarantee Fee

On approval of Guarantee Cover, Demand Advice for Guarantee Fee

and is to be paid upfront for commencement of Guarantee Cover

In enhancement cases, Guarantee Fee is calculated on pro-rata basis

for residual tenure of guarantee

In case of working capital, payment is to be made within one month

from Demand Advice date and in case of term credit, one month
from date of first disbursement / demand advice date, whichever is
later

Facilitating Collateral-free Credit to Micro & Small Enterprises

CGS Annual Service Fee

Annual Service Fee (ASF) is to be paid for all accounts for which

Guarantee Cover has been availed / is in force in a financial year, at

the beginning of the next financial year i.e., ASF is collected in
arrears and is calculated pro-rata for the first and last years.
If payment is not received within stipulated period, Guarantee Cover

lapses and account is liable to be closed. Annual Service Fee is to be

paid till disbursement of first installment of claim
Present Service Fee rate is 0.50% of credit facility sanctioned for

loans upto Rs.5 lakh and 0.75% of credit facility sanctioned for loans
above Rs.5 lakh
Facilitating Collateral-free Credit to Micro & Small Enterprises

Cost of Cover
Upfront Guarantee Fee
North East
Region
(incl. Sikkim)

Others

Annual
Service
Fee

Upto Rs.5 lakh

0.75%

1.00%

0.50%

Above Rs.5 lakh & upto Rs.50 lakh

0.75%

1.50%

0.75%

Above Rs.50 lakh & upto Rs.100 lakh

1.50%

1.50%

0.75%

Credit Facility

MLI is at their discretion may pass on the cost of Guarantee cover to the borrowers.
However, responsibility of payment of Guarantee / Service Fee to the Trust will be on MLIs

Facilitating Collateral-free Credit to Micro & Small Enterprises

CGS Handicraft Artisans

Guarantee Fee / Annual Service Fee in respect of credit facilities

sanctioned to artisans in the handicrafts sector and covered under

the Credit Guarantee Scheme are reimbursable by Office of DC
(Handicrafts)
Disbursement date / amount to be indicated while entering the

details to enable system to appropriate the fee

Guarantee Fee for eligible cases from April 01, 2009 is being

appropriated out of the fund.

For earlier cases, MLIs may inform in writing to enable

appropriation of Annual Service Fee out of the fund.

Facilitating Collateral-free Credit to Micro & Small Enterprises

CGS Claim Settlement

Two stage claim settlement process
First installment of 75% of guaranteed portion of Amount in Default

will be paid within 30 days of receipt of complete information

Interest at prevailing Bank Rate will be paid in case of delay beyond

30 days
Second installment shall be paid on conclusion of recovery

proceedings
On conclusion of recovery proceedings, final loss is shared by

CGTMSE and MLI, in the ratio ranging from 85 : 15 to 62.5 : 37.5, as

the case may be
Facilitating Collateral-free Credit to Micro & Small Enterprises

CGS Claim Settlement

Amount in Default - Outstanding in the account, both principal &

interest, as on date of NPA or the date of lodgment of the claim

application, whichever is lower, subject to maximum of amount
guaranteed
Recoveries made after NPA date / payment of first installment of

claim should be remitted to CGTMSE after deducting legal

expenses, if any
MLIs may use OTS / Compromise settlement route for recovery.

CGTMSE has to be informed if such settlement is negotiated

Facilitating Collateral-free Credit to Micro & Small Enterprises

CGS Benefits
Credit Guarantee Scheme - A tool for
Widening of credit portfolio
Better management of risk
Faster recovery of dues
Enhancement of profitability

Facilitating Collateral-free Credit to Micro & Small Enterprises

Role of Credit Guarantee

A weak project cannot be turned into a viable one with guarantee

cover and is only an additional comfort to the lender, as is collateral

security
Banks should evaluate credit applications by using prudent

banking judgment / due diligence /

business discretion in

supporting only viable projects under the Credit Guarantee

Scheme and conduct the account(s) of the borrowers with normal
banking prudence
Facilitating Collateral-free Credit to Micro & Small Enterprises

CGTMSE Performance
As on June 30, 2012
No. of Credit
Facilities
Approved

Amount of
Guarantees
Approved
(Rs. Crore)

Cumulative
Guarantees
Approved
(Rs. Crore)

Year

No. of
Active
MLIs

FY 2000-01

951

6.06

6.06

FY 2001-02

16

2296

29.52

35.58

FY 2002-03

22

4955

58.67

94.25

FY 2003-04

29

6603

117.60

211.85

FY 2004-05

32

8451

267.46

538.62

FY 2005-06

36

16284

461.91

1000.53

FY 2006-07

40

27457

704.53

1705.06

FY 2007-08

47

30285

1055.84

2701.59

FY 2008-09

57

53708

2199.40

4824.34

FY 2009-10

85

150034

6875.11

11,559.61

FY 2010-11

106

254000

12589.22

23846.01

FY 2011-12

109

243981

13783.98

37139.31

FY 2012-13*

113

60008

3576.84

40559.00

CGTMSE Performance (Top 10 MLIs) as on

June 30, 2012
Proposals

Approved Amount
(in Rs. Lakh)

166003

700926.93

BANK OF INDIA

96366

595564.02

PUNJAB NATIONAL BANK

89520

410442.44

CANARA BANK

63815

213545.80

INDIAN OVERSEAS BANK

56740

247825.80

ALLAHABAD BANK

37072

142692.27

UNION BANK OF INDIA

28662

107864.63

BANK OF BARODA

26631

216396.15

CENTRAL BANK OF INDIA

24462

156529.80

10

UNITED BANK OF INDIA

24046

97926.29

SNo.

MLI

STATE BANK OF INDIA

CGTMSE Performance (Top 10 States) as

on June 30, 2012
SNo.

State Name

Proposals

Approved
Amount (in Rs.
Lakh)

UTTAR PRADESH

116557

432620.31

KERALA

81089

187852.32

WEST BENGAL

75242

301456.56

TAMILNADU

69984

318762.6

KARNATAKA

69190

342592.32

ORISSA

47885

189998.67

MAHARASHTRA

47042

408532.22

GUJARAT

42326

359221.13

RAJASTHAN

37577

141749.12

10

BIHAR

36771

138339.9

CGTMSE

We welcome suggestions, advice and

other inputs to improve our services
Contact us at :
Credit Guarantee Fund Trust for Micro and
Small Enterprises
7th Floor, MSME Development Centre
Plot No.C-11, G Block
Bandra Kurla Complex
Mumbai-400051
Phone : 022-26541803-07, 61437800 (24 lines)
Fax : 022-26541821
E-mail: query@cgtmse.in
Website : www.cgtmse.in