The Credit Guarantee Fund Scheme for
Micro and Small Enterprises (CGS) was launched by the Government of India (GoI)
to make available collateral-free credit to the micro and small enterprise
sector. Both the existing and the new enterprises are eligible to be covered
under the scheme.
Eligible
Lending Institutions
The Banks / Financial Institutions,
which are eligible under the scheme, are scheduled commercial banks (Public
Sector Banks/Private Sector Banks/Foreign Banks) and select Regional Rural
Banks (which have been classified under 'Sustainable Viable' category by
NABARD). As on August 31, 2014, there were 133 eligible Lending Institutions
registered as MLIs of the Trust, comprising of 26 Public Sector Banks, 21
Private Sector Banks, 73 Regional Rural Banks (RRBs), 4 Foreign Banks and 9
other institutions i.e. Delhi Financial Corporation, Kerala Financial
Corporation, Jammu & Kashmir Development Finance Corporation Ltd, Andhra
Pradesh State Financial Corporation, Export Import Bank of India, The Tamil
Nadu Industrial Investment Corporation Ltd., National Small Industries Corporation
(NSIC), North Eastern Development Finance Corporation (NEDFI) and Small
Industries Development Bank of India (SIDBI).
Eligible
Credit Facility
The
credit facilities which are eligible to be covered under the scheme are both term
loans and/or working capital facility up to INR 100 lakh per borrowing unit, extended
without any collateral security and/or third party guarantee, to a new or existing
micro and small enterprise. For those units covered under the guarantee scheme,
which may become sick owing to factors beyond the control of management,
rehabilitation assistance extended by the lender could also be covered under
the guarantee scheme. Any credit facility in respect of which risks are
additionally covered under a scheme, operated by Government or other agencies,
will not be eligible for coverage under the scheme.
Guarantee Cover
The guarantee cover available under the
scheme is to the extent of maximum 85% of the sanctioned amount of the credit
facility. The guarantee cover provided is up to 75% of the credit facility up
to INR 50 lakh (85% for loans up to INR 5 lakh provided to micro enterprises,
80% for MSEs owned/ operated by women and all loans to NER including Sikkim)
with a uniform guarantee at 50% for the entire amount if the credit exposure is
above INR 50 lakh and up to INR 100 lakh. In case of default, Trust settles the
claim up to 75% (or 85%/80%/50% wherever applicable) of the amount in default
of the credit facility extended by the lending institution. For this purpose
the amount in default is reckoned as the principal amount outstanding in the
account of the borrower, in respect of term loan, and amount of outstanding working
capital facilities, including interest, as on the date of the account turning
Non-Performing Asset (NPA).
Tenure
of Guarantee
The Guarantee cover under the scheme
is for the agreed tenure of the term loan/composite credit. In case of working
capital, the guarantee cover is of 5 years or block of 5 years.
Fee
for Guarantee
A composite all -in Annual Guarantee
Fee of 1.0 % p.a. of the credit facility sanctioned (0.75% for credit facility
upto INR 5 lakh and 0.85% for above INR 5 lakh and upto INR 100 lakh for Woman, Micro
Enterprises and units in NER including Sikkim) is now being charged.