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The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme was established by the Government of India and the Small Industries Development Bank of India (SIDBI) to provide collateral-free credit to micro and small enterprises (MSEs). Here are key details about the CGTMSE loan:

Purpose

The primary aim of the CGTMSE scheme is to facilitate easy access to credit for MSEs by providing credit guarantees to financial institutions, thus encouraging them to lend to this sector without requiring collateral.

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CGTMSE Scheme

Key Features

  1. Collateral-Free Loans:
    • The CGTMSE provides a guarantee for loans up to ₹2 crores, allowing MSEs to obtain credit without the need to provide collateral security or third-party guarantees.
  2. Eligible Borrowers:
    • Existing micro and small enterprises engaged in manufacturing or service activities are eligible.
    • Retail trade, educational institutions, and training institutions are generally not eligible.
  3. Loan Coverage:
    • The guarantee covers up to 85% of the loan amount for micro enterprises up to ₹5 lakh.
    • For loans above ₹5 lakh up to ₹50 lakh, the coverage is 75%.
    • For women entrepreneurs, the North Eastern Region (including Sikkim), and special categories, the guarantee cover is 80% for loans up to ₹50 lakh.
    • For loans above ₹50 lakh up to ₹2 crore, the coverage is 50%.
  4. Guarantee Fee and Annual Service Fee:
    • Borrowers need to pay a one-time guarantee fee (ranging from 1% to 1.5% of the loan amount) and an annual service fee (ranging from 0.75% to 0.85%).
  5. Duration of Guarantee:
    • The guarantee is available for the agreed tenure of the term loan/composite credit, which can be extended to a maximum period of 5 years.
  6. Credit Facility:
    • Both term loans and working capital facilities are covered under the scheme.
    • The scheme allows for loans under various categories, including manufacturing, service, and small road transport operators.

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Application Process

  1. Approach a Bank:
    • The borrower needs to approach a member lending institution (MLI) which includes public and private sector banks, regional rural banks, and financial institutions that have signed an agreement with CGTMSE.
  2. Loan Application:
    • Submit the loan application along with the required documents (business plan, project report, financial statements, etc.).
  3. Assessment by the Bank:
    • The bank will assess the application based on its internal credit norms and decide the loan amount and terms.
  4. CGTMSE Coverage:
    • Once the loan is sanctioned, the bank will apply for the CGTMSE guarantee cover. After approval, the loan is disbursed to the borrower.


Benefits for Entrepreneurs

  1. Easy Access to Credit:
    • Facilitates easier access to credit for MSEs which might otherwise struggle due to lack of collateral.
  2. Encourages Entrepreneurship:
    • Supports new and existing businesses, thereby promoting entrepreneurship and employment generation.
  3. Financial Inclusion:
    • Contributes to the financial inclusion of small enterprises, particularly in underserved regions and sectors.

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