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CGTMSE
CGTMSE – CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL ENTERPRISES
The CGTMSE scheme is operationalized by SIDBI and Govt of India in the year 2000. The main objective is that the lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed. This scheme gives an opportunity to entrepreneurs to avail the credit facility from the Bank even if they are not having any collateral security or third party guarantee to offer to the banks.
Coverage of the scheme.
New as well as existing micro and small enterprises engaged in manufacturing and service sector can avail the credit facility up to Rs 100 lacs under this scheme.
It is clarified here that to be eligible under the scheme the original investment in plant and machinery should be up to Rs 5.00 crores for manufacturing sector and original investment in equipment should be up to Rs 2.00 Crores for service sector.
Under the scheme excluding retail trade , all most all business activities in manufacturing and service sector are covered including loans to transport operators.
Purpose of loan.
Working capital needs [fund based and non fund based].
Term loan for construction of factory building/office/purchase of machines and equipments.
The scheme is also available for modernization/expansion of existing units, provided existing facility as well as proposed facilities does not exceeds Rs 100 Lacs.
Nature of facility.
Cash credit
Term loan
Composite loan [Term loan +working capital for one operating cycle]
letter of credit
Bank guarantee.
Primary security.
Primary security shall mean the assets created out of the credit facility and existing unencumbered assets which are directly associated with the project or business for which the credit facility has been extended.
Collateral security.- Not required.
Third party guarantee- Not required. However personnel guarantee of proprietor/partners is not treated as third party guarantee.
Guarantee fees.
|
loan amount |
up front guarantee fees |
for north east and Sikkim |
up front guarantee fee. for NE and Sikkim |
|
up to Rs 5lacs |
1% of sanctioned amount |
up to Rs 5lacs |
1% of sanctioned amount |
|
Beyond Rs 5lacs and up to 100 lacs |
1.5% of sanctioned amount |
beyond Rs 5 Lacs and up to 50 lacs |
0.75% of sanctioned amount |
|
beyond Rs50 lacs to 100 lacs |
1.5% of sanctioned amount |
The guarantee fee should be paid within 30 days from the date of first disbursement.
Annual service fees.
Annual service fee is required to be paid every year before 31st may to continue the cover under the above scheme.
The annual service fees is 0.5% of the credit facility up to Rs 5lacs and 0.75% of the credit facility beyond Rs 5lacs to 100 lacs.
Both the guarantee fee as well as annual service fee are recovered by the bank from the borrower for payment to CGTMSE trust.
It is to be noted that coverage of loan under above scheme is a facility to the borrower to avail without collateral security. It gives an additional responsibility on the borrower to make prompt repayment. In case of default bank is under obligation to initiate the action for recovery of dues as per rule including legal action to satisfy CGTMSE. If the bank has taken the claim in case of default from CGTMSE, the same is required to be refunded after recovery from borrower. Hence the facility should be availed with a good spirit of paying back in time.
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