ENTP PRSNT

8/8/2019 ENTP PRSNT.

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WWW.CGTMSE.IN

A Website Review

- Group 12

Tolani Institute of Management Studies


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INTRODUCTION

CGTMSE- Credit Guarantee Fund Trust for Medium and

Small Enterprises.

Set up by Government of India and Small Industries

Development Bank of India (SIDBI)

Encouraging the entrepreneurs to achieve their dreams.

Giving a boost to MSE sector via credit guarantee

scheme.

Facilitating collateral free credit and merit based lending.

Minimizing Credit Risk in MSE lending.

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OBJECTIVES

Availability of bank credit without the hassles of collaterals / thirdparty guarantees would be a major source of support to the firstgeneration entrepreneurs to realize their dream of setting up a unitof their own Micro and Small Enterprise (MSE).

Keeping this objective in view, Ministry of Micro, Small & MediumEnterprises (MSME), Government of India launched Credit GuaranteeScheme (CGS) so as to strengthen credit delivery system andfacilitate flow of credit to the MSE sector.

The main objective is that the lender should give importance toproject viability and secure the credit facility purely on the primarysecurity of the assets financed.

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Contd..

The other objective is that the lender availing guarantee facility

should endeavor to give composite credit to the borrowers so

that the borrowers obtain both term loan and working capital

facilities from a single agency.

The Credit Guarantee scheme (CGS) seeks to reassure the

lender that, in the event of a MSE unit, which availed collateral

free credit facilities, fails to discharge its liabilities to the

lender, the Guarantee Trust would make good the loss incurredby the lender up to 75 / 80/ 85 per cent of the credit facility.

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CREDIT GUARANTEE

Credit facility to new as well as existing MSEs.

Loan limit raised to ` 1 crore from ` 50 lakhs.

The guarantee cover available under the scheme is to the extent

of 75% / 80% of the sanctioned amount of the credit facility,with a maximum guarantee cap of ` 62.50 lakh / ` 65 lakh.

The extent of guarantee cover is 85% for micro enterprises for

credit up to ` 5 lakh.

The extent of guarantee cover is 80%:(i) Micro and Small Enterprises operated and/or owned by

women.

(ii) all credits/loans in the North East Region (NER).

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LOGO- AN INSPIRATION

Three light blue stripes connecting the word CGTMSE indicate

sources of 'comfort', 'hope' and 'inspiration' the Trust provides and

the Flame indicates the continuous support being provided by the

Trust to the entrepreneurs in realizing their dream of setting up units

of their own.

Yellow color around flame indicates source of energy given by the

Trust to the entrepreneurs for setting up units in the MSE sector

without having to worry about providing collateral security and / or

third party guarantees.

The blue triangular shape resting on the word CGTMSE indicates the

shed of an industrial unit and growth of MSEs in upward direction.

All above things lead to believe that both the word CGTMSE & its

LOGO ensure assured help for the entrepreneurs to set up MSE

units.

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ELIGIBILITY CRITERIA

Eligible lending institutions

Eligible borrowers

Maximum Risk Cover:

-- Of the credit facilities extended by MLIs, Trust shall guarantee,in case of default by the borrower, up to 75 per cent (85% for

select category of borrowers), of the defaulted principal amount

in respect of term credit including interest on principal for one

quarter and / or outstanding working capital advances (inclusive

of interest), as on the date of account becoming NPA, or as on the

date of filing the suit, whichever is lower. Other charges such as

penal interest, commitment charge, service charge, or any other

levies/ expenses shall not qualify for the guarantee cover.

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Contd..

Rehabilitation assistance:

For the unit covered under CGTMSE and becoming sick due to

factors beyond the control of management, assistance for

rehabilitation extended by the lender could also be covered

under the scheme provided the overall assistance is within the

credit cap of Rs.100 lakh.

Non-Eligibility:

Any facility given on the basis of collateral security or third

party guarantee shall be disqualified for coverage under thescheme. The Trust also reserves the right to reject any

application for the guarantee cover, if it deems necessary.

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FEES

Guarantee fee

For credit facility upto Rs.5 lakh, an upfront Guarantee Fee (GF) of 1% of

the amount sanctioned will have to be paid to the Trust by the MLI. For

amounts sanctioned beyond Rs.5 lakh and upto Rs.100 lakh, the GF is 1.5%,

while for credit facility upto Rs. 50 lakh for units in the North Eastern Regionincluding Sikkim , the GF is 0.75% . The GF will have to be paid within 30

days from the date of first disbursement of credit facility by the MLI to a

borrower.

Annual service fee

Guarantee cover extended by CGTMSE in respect of any specific borrowershall be valid provided the MLI concerned pays an Annual Service Fee (ASF)

of 0.50% on the amount guaranteed for credit facilities upto Rs.5 lakh and

0.75% on the amount guaranteed for credit facilities beyond Rs.5 lakh and

upto Rs.100 lakh. Such ASF is to be paid by the MLI on or before 31st May

of that year. The Trust reserves the right to revise the guarantee fee /

annual service fee from time to time.

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Costto the borrower

The Credit Guarantee Scheme leaves it to thediscretion of the MLIs to decide about passing on

the incidence of Guarantee Fee and AnnualService Fee to the borrower or alternatively theymay decide to bear it themselves.

Interest rate payable byborrower

The MLI shall follow the guidelines issued by RBI.However, interest rate shall not exceed 3 per centover and above the Prime Lending Rate of theMLI, excluding the annual service fee.


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CLAIM SETTLEMENT11

Prior to lender (also referred to as MLI) preferring anyclaim on the Trust, there shall be a lock-in-period of 18months from either the date of last disbursement of loanto the borrower or the date of the guarantee cover

coming into force in respect of the particular creditfacility, whichever is later.

The lender shall, however, prefer a claim on thedefaulted account, which has become NPA, immediatelyafter recall of loan and initiation of recoveryproceedings by way of legal action as specified by theTrust from time to time.


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The payment of claim by the Trust under question

does not in any way take away the responsibility of

the borrower to repay the entire amount of

outstanding to the lender. The lender shall exerciseall caution and maintain its recourse to the borrower

for full amount owed by him and effective action for

recovering the amount including such action as may

be suggested by the Trust.


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Appropriation of Residual Recovery:

In case of default, the lenders would exercise the right to

takeover the assets. However, the Trust would have the

priority in appropriation of sale of assets by the lendersbefore making the final settlement of the claim. Therefore,

the amount realized from the sale of assets (residual

recovery) must first be credited in full by the lenders to

the Trust before they can finally claim the remaining 25per cent of the default / guaranteed cap amount.


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SECURITIZATION16

One of the major objectives of the CGTMSE wouldbe to facilitate securitization of the loansguaranteed by the Trust.

Keeping in view the securitization models operatedby the Small Business Administration of USA and inother developed countries, the Trust would endeavor

to facilitate securitization of guaranteed loans in abig way with the facility to investors for tradingthese securities in the secondary debt markets.

Documents

ENTP PRSNT