46 XX | Enlightener Series | B. Central Government Schemes | B.8 Credit Guarantee Scheme for Micro and Small Enterprises

Disclaimer….before you read ahead!
The information contained herein is of a general nature and for information purposes only, with the intent of raising awareness around various resources, schemes etc. available for women entrepreneurs in India. It is not intended to address the circumstances of any particular individual or entity. It does not purport to be all-inclusive or necessarily contain all the information that may be relevant for the reader, and may be subject to updation, revision or amendment. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to remain accurate in the future. The reader, therefore, is required to exercise their discretion; and not act on such information without appropriate professional advice after a thorough examination of the particular situation.

Furthermore, we are not a lender and are not authorized by the Reserve Bank of India to act as one. By disseminating the information contained herein, we are not soliciting any borrower or customers for the company or organization mentioned herein nor do we intend to syndicate any capital for the reader of this email.

About this scheme…

Credit Guarantee Scheme for Micro and Small Enterprises (CGS) was formally launched on August 30, 2000 (operational w.e.f. January 1, 2000) by Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), set up by Government of India (GOI) and SIDBI with the aim of supporting Micro and Small Enterprises (MSEs) avail collateral free or guarantee free (or with partial collateral or guarantee) credit facilities from banks and financial institutions.

Currently, the Scheme is divided into two – CGS-I (Credit Guarantee Schemes for Banks) and CGS-II (Credit Guarantee Scheme for NBFCs) – to cover collateral free or guarantee free (or with partial collateral or guarantee) credit facilities to MSEs by Banks/FIs and NBFCs respectively.

How is it being implemented?

Under CGS, up to 85% guarantee coverage is being provided to Member Lending Institutions (MLIs) namely, Banks, FIs and NBFCs to enable them to extend collateral free or guarantee-free (or with partial collateral or guarantee) credit facilities to new and existing MSEs engaged in manufacturing, trading or service activities (excluding Agriculture, Self Help Groups (SHGs) etc.).

Currently, 114 Banks & Financial Institutions and 41 NBFCs are empaneled as MLIs who can extend such collateral free or guarantee-free credit facilities to MSEs under CGS.

Furthermore, under this scheme, where credit facilities are sanctioned by Banks/FIs, additional extent of guarantee coverage is given for Women Entrepreneurs, MSEs promoted by Agniveers, MSEs situated in Aspirational District, ZED certified MSEs, SC/ST entrepreneurs and Person with Disability (PwD)

What’s on offer?

Below are the features of CGS covered credit facilities offered by MLIs to new or existing MSEs:

I. Product

Term loan
Working capital facility
Non-fund based facilities such as Bank Guarantee, Letter of Credit etc.
CGS applicable on following limits of credit facilities (as mentioned above) to a single borrower sanctioned by MLIs:
- upto ₹50 Lakhs where MLIs are Regional Rural Banks (RRBs), select Financial Institutions or Microfinance Institutions
- upto ₹2 Crores where MLIs are Scheduled Commercial Banks, select Financial Institutions, Small Finance Banks (SFBs), Scheduled Urban Co-operative Banks (including Non-Scheduled Urban Co-operative Banks), State Co-operative Banks, District Central Co operative Banks and NBFCs
  - For MSEs in retail trading where credit facilities have been sanctioned by NBFCs, the limit is upto ₹1 Crore

II. Purpose:

Acquisition of fixed assets
Working capital requirements

III. Borrower Type:

Individuals, Sole Proprietorship, Partnership, Trusts, HUF, Association of Persons, Cooperative Society, Limited Liability Partnerships (LLPs), Private Company, Public Company or any other legal entity

IV. Security or collateral or Guarantee or Insurance

Primary Security: First charge on assets created out of the credit facility so extended and/or existing unencumbered assets which are directly associated with the project or business for which the credit facility has been extended
Collateral or Third Party Guarantee:
- Typically Nil requirement as credit facility covered under CGS
- Since 2018, CGS-I also covers credit facilities sanctioned by Banks/FIs against partial collateral security and/or third party guarantee under “Hybrid or Partial Security” model to the extent that the unsecured portion of such facilities is up to a maximum of ₹2 Crores (or ₹50 Lakhs in case of RRBs) as prescribed above. In such case, CGTMSE will have pari passu charge on the primary security as well as notional second charge on the collateral security provided by the borrower for the credit facility
- CGS guarantees MLIs the following coverage on credit facilities extended to women entrepreneurs under the scheme:
  - For unsecured credit facility by Banks/FIs under CGS-I of upto ₹2 Crores: 85% of the amount in default subject to a maximum of upto ₹1.7 Crores
  - For unsecured credit facility by NBFCs under CGS-II of upto ₹2 Crores: 75% of the amount in default subject to a maximum of upto ₹1.5 Crores
Insurance: For more information on this, please contact your Lender MLI

V. Interest Rate

For more information on this, please contact your Lender MLI
Interest rates charges as per RBI guidelines is eligible for coverage under the Scheme
To avail guarantee cover for credit facilities sanctioned under CGS, MLIs have to pay an Annual Guarantee Fee (AGF) to CGTMSE which it may choose to bear it themselves or pass on the incidence to the borrower which may be reflected in the interest rates charged. For Women Entrepreneurs, 10% concession/discount is extended on applicable AGF

VI. Processing Fee

For more information on this, please contact your Lender MLI
To avail guarantee cover for credit facilities sanctioned under CGS, MLIs have to pay an Annual Guarantee Fee (AGF) to CGTMSE which it may choose to bear it themselves or pass on the incidence to the borrower which may be reflected in the processing fee charged. For Women Entrepreneurs, 10% concession/discount is extended on applicable AGF

VII. Margin Money Requirement

For more information on this, please contact your Lender MLI

VIII. Tenure, Repayments & Pre-Closures

For more information on this, please contact your Lender MLI
W.r.t guarantee cover for MLIs under CGS:
- For term loans or composite loans: tenure of the loan or loan termination date, whichever is earlier OR such period as may be specified by CGTMSE
- For working capital facility: 5 years or block of a 5 years on renewal of guarantee cover or loan termination date, whichever is earlier OR such period as may be specified by CGTMSE

IX. Turnaround Time

For more information on this, please contact your Lender MLI

Interested? Read ahead to check your eligibility….

I. Is your business a new or existing Micro or Small Enterprise as per MSMED Act 2006?

II. Is your business engaged in manufacturing, retail trading or service (per the MSMED Act 2006) activity excluding Agriculture, Self Help Groups (SHGs) etc.?

III. In case your business is looking to avail a credit facility of more than ₹5 Lakhs, does it have an IT-PAN number?

IV. Does your business meet the eligibility criteria of the Lender MLI?

If your answers to the questions above are an emphatic YES, you are all set to avail credit facility under CGS!

So…how big is this scheme and what has been done so far?

I. As of today, a total corpus of ₹7,500 Crores has been contributed by GOI and SIDBI in the ratio of 14:1 to fund CGTMSE. Recently in Budget 2023-24, Hon’ble FM announced an additional infusion of ₹9,000 Crores to the CGTMSE corpus to enable additional collateral-free guaranteed credit of ₹2 Lakh Crores to MSMEs and reduce the cost of the credit by about 1%

II. As of March 31, 2022, cumulatively 88.93 Lakh guarantees for an amount of ₹3.18 Lakh Crores have been approved for guarantee cover across all schemes of CGTMSE

Of these, 14% of the total amount was guaranteed to women beneficiaries

III. As of March 31. 2022, cumulatively 58.60 Lakh guarantees for an amount of ₹3.15 Lakh Crores have been approved for guarantee cover under CGS-I and CGS-II

Details around how many of these pertained to women entrepreneurs don’t seem to be available in public domain

IV. During 2021-22, 717,020 guarantees were approved for an amount of ₹56,172 Crores for guarantee cover under CGS-1 and CGS-II

Details around how many of these pertained to women entrepreneurs don’t seem to be available in public domain

So, now, how should you go about it?

I. For checking eligibility & submitting application to avail CGS:

Apply online here to get a Provisional Guarantee Certificate stating in-principle CGTMSE guarantee coverage one may be eligible for. After receiving this certificate, one must contact selected MLI for further loan processing & procedure. You may also refer to the relevant links w.r.t process & FAQs, here, here and here. Please note that the Provisional Guarantee Certificate does not commit loan sanction by MLI nor does it commit final Guarantees to MLI and/or the applicant, and is subject to thorough due diligence by MLI and its final decision. Currently, online application on UDAAN portal for availing such Provisional Guarantee Certificate is available for Sole Proprietorship firms only

Contact your Lender MLI directly. Currently, 114 Banks & Financial Institutions and
41 NBFCs are empaneled as MLIs who can extend such collateral free or guarantee-free credit facilities to MSEs under CGS

II. For information

On documents required for obtaining a Provisional Guarantee Certificate online, check out the FAQ “What documents are required to get Provisional Guarantee Certificate?” under Registration & Login section
On CGS initialization application & list of documentation required, contact your Lender MLI

III. For any queries, please contact:

Contact Udaan for MSE (for queries on obtaining Provisional Guarantee Certificate online)
- Via phone during office hours 10.00 am to 06.00 pm on +919321702102 or 022 67221490 or 022 67221553
- Via e-mail on info@udaanformse.in

Your Lender MLI

CGTMSE during office hours 10.00 am to 06.00 pm via phone on
- Toll Free 1800222659
- Phone 022 67221553
Check out the FAQs on CGTMSE website. Select Credit Guarantee Schemes, Credit Guarantee Schemes for Banks (CGS-I) followed by FAQs