Credit and finance for MSMEs: The finance minister Nirmala Sitharaman in her budget 2023 speech on Wednesday announced revamping the credit guarantee scheme under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) with the infusion of Rs 9,000 crore in the corpus, effective April 1, 2023. The revamp will enable additional collateral-free credit of Rs 2 lakh crore to MSMEs while the cost of credit will be reduced by 1 per cent.
“Last year, I proposed revamping of the credit guarantee scheme for MSMEs. I am happy to announce that the revamped scheme will take effect from 1st April 2023 through infusion of Rs 9,000 crore in the corpus. This will enable additional collateral-free guaranteed credit of Rs 2 lakh crore. Further, the cost of the credit will be reduced by about 1 per cent,” Sitharaman said.
Also read: Budget 2023: Key announcements by FM Nirmala Sitharaman for MSMEs
The minister in the last year’s budget itself had announced revamping the scheme with the “required infusion of funds”, however, she hadn’t stated the amount then. Welcoming the move, Arun Poojari, Co-founder and CEO of supply chain financing company Cashinvoice told FE Aspire that strengthening CGTMSE corpus further is a positive step as the scheme has proved to be a great enabler in facilitating MSME credit, especially during the COVID crisis.
“However, CGTMSE corpus availability has been limited to term loan products. Expanding the coverage by bringing supply chain finance products such as inventory funding, bill discounting and factoring under the ambit of CGTMSE can make it impactful for the MSME as it will help solve the working capital availability,” said Poojari.
Also read: Economic Survey: MSMEs’ Covid recovery evident in GST paid crossing pre-pandemic level
Importantly, the scheme, implemented by SIDBI, was revised in December last year with a number of changes. For example, MSEs seeking guarantee cover under the scheme for the collateral-free credit were mandated to provide their Udyam registration number (URN) from next year onwards. Also, microfinance institutions (MFIs) were added to the list of member lending institutions (MLIs).
“These changes are part of the revamp that has been announced in the budget,” Sandeep Varma, CEO, CGTMSE told FE Aspire.
Moreover, the annual guarantee fee (AGF) was reduced for MLIs by 10 per cent in order to encourage them to enhance credit flow to MSEs. The scheme was also extended to women and SC-ST entrepreneurs, MSEs certified with the Zero Defect and Zero Effect (ZED) scheme, and MSEs based in aspirational districts in the country as well.
“CGTMSE revamp should enable better and wider implementation of the scheme and improved meeting of claims,” Ashok Saigal, Co-chairman, CII National MSME Council told FE Aspire.
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