CGTMSE Scheme

Why in news?

• The Union Minister for MSME recently launched the revamped Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) Scheme.

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

• It was launched in 2000 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.
• The corpus of CGTMSE is contributed by the GoI and SIDBI in the ratio of 4:1 respectively.
• The Ministry of MSMEs and SIDBI established a trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the CGTMSE Scheme.

About Revamped CGTMSE:

• The revamped version of the CGTMSE Scheme has been provided with an additional corpus support of ?9,000 crore in the Union Budget for FY 2023-24 to provide a guarantee for an additional ?2 lakh crore to MSEs.
• Other major changes made in the revamped version include:
  • Reduction in guaranteed fees for loans up to ?1 crore by 50%.
  • Raising of ceiling for guarantee from ?2 crore to ?5 crore.
  • Raising the bar for claim settlement without taking legal action from the previous limit of Rs. 5 lakhs to Rs. 10 lakhs.

Significance:

• The reduced guaranteed fees will make it easier for MSEs to avail loans.
• The increased ceiling for guarantee and threshold limit for claim settlement will provide better protection to lenders in case of any default by the borrower.
• The scheme is expected to boost credit flow to MSEs, thus creating more employment opportunities in the country.
• These changes have been made to improve the accessibility, affordability and availability of credit to MSEs, especially in the wake of the COVID-19 pandemic and its impact on their businesses.

PRACTICE QUESTION

Which of the following statements is/are correct regarding ‘Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) Scheme’?

1. It aims to make available collateral-free credit to the micro and small enterprise sector.

2. Only existing enterprises are eligible to be covered under the scheme.

Select the correct answer using the code given below:

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Answer