The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) Scheme is an initiative put forth by the Government of India (GoI) in 2000. The objective behind this programme was to provide collateral-free credit to micro and small enterprise (MSE) sector. This scheme covers both new and existing enterprises under its umbrella and is funded jointly by the GoI and SIDBI, with a funding ratio of 4:1 respectively.
The Ministry of MSMEs alongside the Small Industries Development Bank of India (SIDBI) established a trust called CGTMSE to implement this scheme. The intent behind the launch of CGTMSE is to create a financial inclusion centre, in collaboration with the National Institute for MSME in Hyderabad. This centre aims at enhancing financial literacy and providing credit counselling to MSEs.
It’s important to note that SIDBI, which was established in April 1990, plays a significant part in promoting, financing, and developing the MSME sector.
Revamping CGTMSE and its Impact on MSMEs
Recently, the Union Minister for MSME launched the revamped form of the CGTMSE Scheme. This updated version has been granted an additional corpus support of ₹9,000 crore for the fiscal year 2023-24, thereby guaranteeing an additional ₹2 lakh crore to MSEs.
This revamped version also introduced pivotal changes like a 50% reduction in guaranteed fees for loans up to ₹1 crore and also an increase in the ceiling for guarantee from ₹2 crore to ₹5 crore. There’s also a rise in the bar for claim settlement without legal action from the previous limit of Rs. 5 lakhs to Rs. 10 lakhs.
The reformation in the CGTMSE scheme will make it easier for MSEs to avail loans and also provide them with better protection against default. It aims at enhancing credit flow, thereby creating more employment opportunities in the country.
Other MSME Credit Initiatives
Apart from CGTMSE, several other promising initiatives have been put forth to support the MSME sector. These include schemes like the Prime Minister’s Employment Generation Programme (PMEGP), which is a credit-linked subsidy scheme aimed at assisting new micro-enterprises and generating employment opportunities.
Other initiatives are the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) that works towards organizing artisans and traditional industries into clusters and providing them with financial aid to compete in today’s market scenario, and the Interest Subvention Scheme for Incremental Credit to MSMEs that helps legal MSMEs with a relief upto 2% of interest on their fresh/incremental term loan/working capital during its validity period.
The MSME Loan in 59 Minutes is an online portal that ensures quick and hassle-free loans up to Rs. 5 crore within 59 minutes. The MUDRA Loan Schemes provides loans up to Rs. 10 lakh to micro and small enterprises with low-interest rates, without the need for collateral. The National Small Industries Corporation (NSIC) aids MSMEs in obtaining credit from various banks and financial institutions at competitive interest rates with minimum documentation.
The Credit Link Capital Subsidy Scheme (CLCSS) for Technology Upgradation offers a capital subsidy of 15% (up to Rs. 15 lakh) to MSEs for technology advancement and installation of new machinery. This scheme covers over 50 sub-sectors and aims to improve the quality, productivity, and competitiveness of MSEs.
