Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) Scheme

About Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE):

• Ministry of Micro, Small & Medium Enterprises (M/o MSME) started Credit Guarantee Scheme for Micro & Small Enterprises (MSEs) in the year 2000.
• Objective: To catalyze the flow of institutional credit to Micro & Small Enterprises (MSEs). 
• The scheme was formally launched on August 30, 2000, and is operational with effect from 1st January 2000.
• The scheme aims to facilitate access to credit for the unserved and underserved MSE segment of the MSME Sector, making the availability of credit from conventional lenders to new generation entrepreneurs and underprivileged, that lack supporting their loan proposal with collateral security and/or a third-party guarantee.
• In order to implement the Credit Guarantee Scheme, CGTMSE was jointly set up by the M/o MSME, Government of India,and Small Industries Development Bank of India (SIDBI).
• Funding: The corpus of CGTMSE is being contributed by the Government of India and SIDBI in the ratio of 4:1.
• Eligible Lending Institutions:
  • Scheduled commercial banks (Public Sector Banks/Private Sector Banks/Foreign Banks) and select Regional Rural Banks (which have been classified under the 'Sustainable Viable' category by NABARD).
  • National Small Industries Corporation Ltd. (NSIC), North Eastern Development Finance Corporation Ltd. (NEDFi), SIDBI, selected Small Finance banks, and NBFCs have also been made eligible institutions.
• Eligible Credit Facility:
  • CGTMSE facilitates collateral free credit support of upto Rs. 5 crores to MSEs, extended by the CGTMSE’s Member Lending Institutions.
  • The extent of guarantee cover is 85% for micro enterprises for credit up to Rs. 5 lakhs. For credit ranging from Rs. 5 lakhs to Rs. 500 lakhs, the extend of guarantee cover is 75%.
  • The extent of guarantee cover is 80% for loans/credits in the North East Region (incl. Sikkim, UT of Jammu & Kashmir, and UT of Ladakh) for credits up to Rs. 50 lakhs. Above Rs.50 lakhs, guarantee cover is 75%.
  • The extent of guarantee cover is 85%for MSMEs owned/operated by SC/ST entrepreneurs, Persons with Disabilities (PwDs), MSEs situated in Aspirational Districts, ZED certified MSEs and MSE promoted by Agniveers.
  • Extent of guarantee cover is 90% for MSME owned/operated by women.
  • For all other category of borrowers, the Extent of guarantee cover is 75%.
• In cases of default, the trust settles the claim up to 75% (85%/80% wherever applicable) of the amount in default of the credit facility extended by the lending institution.

Q1: What is the Small Industries Development Bank of India (SIDBI)?

Small Industries Development Bank of India (SIDBI) was established under an Act of the Parliament in 1990. SIDBI is the Principal Financial Institution engaged in promotion, financing & development of the Micro, Small and Medium Enterprises (MSMEs) sector and coordination of the functions of the various institutions engaged in similar activities.

Source: Enhanced credit guarantee coverage to profit 2.7 mn women-led MSMEs: Manjhi