CGTMSE is a scheme launched by the Government of India in 2006. The scheme provides collateral-free loan to Micro and Small Enterprises (MSEs) which helps them in getting access to finance from banks. The main aim of this scheme is to promote entrepreneurship and employment generation. In this article, we will discuss the various benefits of CGTMSE for MSMEs in India.
What is CGTMSE?
CGTMSE is the Credit Guarantee Fund Scheme for Micro and Small Enterprises. It was set up by the Government of India in 2000 to provide collateral-free credit to micro and small enterprises (MSEs). The scheme covers loans of up to Rs. 1 crore per borrower. CGTMSE has helped increase access to credit for MSEs, which have traditionally been underserved by the formal banking sector. The scheme has also helped reduce the cost of borrowing for MSMEs.
The scheme has been successful in achieving its objectives, and has helped increase the flow of credit to MSMEs. As of March 31, 2018, CGTMSE had guaranteed over Rs. 52,000 crore of loans to more than 12 lakh MSMEs. The scheme has helped create employment opportunities for over 60 lakh people.
What are the benefits of CGTMSE for MSMEs in India?
CGTMSE is a trust set up by the Indian Government to provide collateral-free credit guarantee for micro and small enterprises (MSMEs). The credit guarantee is provided for loans extended by banks and financial institutions to MSMEs.
The objectives of CGTMSE are:
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To improve access to finance for MSMEs
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To reduce the risk of lending to MSMEs
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To promote entrepreneurship among MSMEs
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To encourage banks and financial institutions to lend to MSMEs
CGTMSE provides credit guarantee cover of up to 85% of the loan amount extended by banks and financial institutions to MSMEs. The maximum loan amount that can be guaranteed is Rs. 5 crore. The credit guarantee cover is provided for a period of 5 years.
The benefits of CGTMSE for MSMEs in India are:
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Improved access to finance
CGTMSE enables MSMEs to get loans from banks and financial institutions without any collateral. This improves their access to finance.
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Reduced risk of lending
The credit guarantee cover provided by CGTMSE reduces the risk of lending for banks and financial institutions. This encourages them to lend more to MSMEs.
How can CGTMSE help MSMEs in India?
The Credit Guarantee Fund for Micro and Small Enterprises (CGTMSE) is a trust fund set up by the Government of India for providing credit guarantee cover to banks and financial institutions for loans extended to micro and small enterprises (MSMEs).
The scheme was launched in August 2000 with the objective of promotion of entrepreneurship among MSMEs by facilitating access to credit from formal banking channels. The scheme covers both new and existing MSMEs.
Under the scheme, banks and financial institutions can extend collateral-free credit facilities to MSMEs up to Rs.2 crore without the need for any third-party guarantee. In case of default, the lending institution can claim payment from the CGTMSE fund.
The scheme has helped increase access to formal credit for MSEs, which in turn has helped them expand their businesses and create employment opportunities. As per data from Reserve Bank of India, as on March 31, 2018, over 12 lakh loan accounts had been sanctioned under the scheme with a cumulative loan amount of Rs.58,636 crore.
In addition to providing collateral-free credit, the CGTMSE also offers other benefits such as easy repayment terms, no pre-payment penalties, etc.
What are the steps to take to avail of CGTMSE benefits for MSMEs in India?
Assuming you would like tips for availing CGTMSE benefits for MSMEs in India:
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1 Research if your MSME is eligible for CGTMSE benefits.
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2 Understand the types of benefits available and see if any fit your MSME’s needs.
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3 Get your Udyam Registration to be eligible to apply for CGTMSE benefits.
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4 Submit an application to the concerned authority.
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5 Keep track of the status of your application and follow up as needed.
Conclusion
Overall, CGTMSE is a great scheme for MSMEs in India as it provides them with much-needed financial support and also encourages them to grow and expand their businesses. The benefits of CGTMSE are many and varied, but some of the most notable ones include the fact that it helps to reduce the risk of business failure, promotes entrepreneurship, and boosts employment opportunities. If you're an MSME looking for financial assistance, then CGTMSE could be a great option for you.