CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises, which is a scheme introduced by the Government of India to Support the growth and development of micro and small enterprises (MSMEs).
Launched in 2000, the scheme aims to address the primary challenge faced by MSMEs – lack of access to adequate and timely credit facilities from financial institutions.
The CGTMSE Scheme provides collateral-free credit facilities to MSMEs, enabling them to secure loans without the need for tangible assets as security.
This scheme plays a crucial role in promoting entrepreneurship, fostering job creation, and bolstering the Indian economy.
In this article, we will discuss CGTMSE Scheme – Features, Benefits, Eligibility & Documents Required, etc.
Table of Contents
Benefits of CGTMSE Scheme
The following are the benefits of CGTMSE Scheme-
- The primary benefit of the CGTMSE Scheme is that it enables MSMEs to obtain collateral-free credit
- The scheme plays a crucial role in mitigating risks for lenders, such as banks and financial institutions, by providing a credit guarantee on a significant portion of the loan amount disbursed to MSMEs
- This encourages lenders to extend credit to MSMEs, even those with limited credit history or inadequate collateral. It reduces the fear of default and promotes lending to this segment, leading to increased credit flow to MSMEs.
- By facilitating access to credit, the CGTMSE Scheme promotes entrepreneurship and encourages the establishment of new MSMEs
- The CGTMSE Scheme provides provisions for loan restructuring and rehabilitation in cases where MSMEs face financial difficulties.
- The CGTMSE Scheme promotes inclusive growth by extending credit facilities to MSMEs across various sectors and regions.
Eligibility Criteria for CGTMSE Scheme
The following are the eligibility criteria for CGTMSE Scheme-
- The scheme is applicable to micro and small enterprises (MSMEs). These enterprises are classified based on their investment in plant and machinery or equipment
- The CGTMSE Scheme covers loans up to a certain limit, known as the Maximum Loan Limit (MLL) which depends on the classification of the MSMEs as per the MSME Act
- You need to have a satisfactory track record in terms of repayment of existing loans and credit facilities
- The borrower is required to pay a guarantee fee to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
- The scheme has certain exclusions, such as MSMEs engaged in certain activities like agriculture, educational institutions, self-help groups, and training institutions
How to Apply for CGTMSE Scheme?
You can apply for CGTMSE Scheme by following these steps-
- The first step is to identify a financial institution or lending agency that is registered and authorized to provide loans under the CGTMSE Scheme
- Now, gather the necessary documents including business-related documents such as the business plan, financial statements, income tax returns, KYC (Know Your Customer) documents, and other relevant certificates or licenses
- Fill out the loan application form provided by the participating lending institution. Provide accurate and detailed information about your business, financials, and loan requirements
- Submit the completed loan application form along with the required supporting documents to the lending institution
- The lending institution will evaluate your loan application and conduct a thorough assessment of your business, financials, and creditworthiness
- If your loan application is approved, the lending institution will sanction the loan amount and initiate the process for availing of the CGTMSE guarantee
- Once all the formalities are completed, the lending institution will disburse the loan amount as per the approved terms.
Documents required for loan application
The following are the documents required for the loan application-
- Duly filled CGTMSE loan application form with passport-sized photographs
- Business Incorporation or Company Registration Certificate
- Business Project Report
- CGTMSE Loan Coverage Letter
- Copy of loan approval from the Bank
- PAN Card
- Aadhaar Card
- Any other document required by the Bank
FAQ
Under the scheme, the Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE) provides a guarantee to lending institutions for a significant portion of the loan amount disbursed to MSMEs so that the businessman can get a collateral-free loan for their business.
MSMEs from both the manufacturing and service sectors, as per the definition of MSMEs under the MSME Act, are eligible to apply for the scheme.
The loan limit is determined by the Maximum Loan Limit (MLL), which depends on the classification of the MSMEs as per the MSME Act and is subject to periodic revisions.
No, MSMEs do not need to provide collateral for loans under the scheme. It is a collateral-free credit facility supported by the Government scheme.
The CGTMSE acts as a credit guarantee provider, offering a guarantee to lending institutions to cover a portion of the loan amount disbursed to MSMEs.
MSMEs can apply for the scheme by approaching participating lending institutions, such as banks, NBFCs, or RRBs, that are registered under the CGTMSE Scheme.
Yes, MSMEs are required to pay a guarantee fee to the CGTMSE. The fee is calculated as a percentage of the loan amount and is payable at the time of availing the guarantee.
Yes, MSMEs with existing loans can also avail of the benefits of the CGTMSE Scheme, provided they meet the eligibility criteria and other requirements.
I’m Shiv Kumar, a graduate with a passion for finance, marketing, and technology. My journey into finance started with a desire to understand money management and investing.
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