Credit and finance for MSMEs: Finance minister Nirmala Sitharaman in a post-budget interaction with various industries’ representatives in Hyderabad on Thursday said she will review the collateral-free credit guarantee scheme for micro and small enterprises (CGTMSE) for benefits to SC/ST entrepreneurs. “On CGTMSE, I need to have a review of it if there has been an inadvertent exclusion of SC/ST (entrepreneurs) from the scheme. Most often when I review it, the allocation or disbursals for different categories are reviewed. But if you feel SC/ST entrepreneurs have not really benefitted from CGTMSE, I will review it,” the minister said.
Sitharaman was responding to a query raised by Ravi Kumar Narra, National President at the industry body for SC/ST entrepreneurs Dalit Indian Chamber of Commerce and Industry (DICCI) at the event.
“When we (SC/ST entrepreneurs) approach banks, they say we are eligible only under the Stand-Up India scheme. Hence, some percentage of allotment under CGTMSE should also focus on funding the SC/ST entrepreneurs,” Narra said.
Also read: CGTMSE: Budget 2023 puts Rs 9,000 crore in credit guarantee scheme for MSMEs
For the uninitiated, launched in 2000, CGTMSE focused only on micro and small enterprises till November last year. The scheme was revamped by SIDBI, which manages it, effective December 1, 2022, to extend it to SC/ST entrepreneurs also in addition to women entrepreneurs, ZED-certified enterprises and also aspirational district MSEs, FE Aspire had reported.
According to a circular ‘Modification in Extent of Guarantee Coverage’ sent by CGTMSE to all of its member lending institutions (MLIs) on November 30, 2022, the maximum extent of credit guarantee coverage to women and SC-ST entrepreneurs, ZED-certified MSEs and those based in aspirational districts for loans up to Rs 2 crore was fixed at 85 per cent. In comparison, for existing categories including micro enterprises, micro enterprises based in the northeast and other categories of borrowers, the guarantee cover continues to be up to 75 per cent.
“There was earlier nothing for SC/ST MSEs or ZED-certified units. Women entrepreneurs in the northeast only had access to 75 per cent coverage. Now these categories have been included under CGTMSE as these are priority areas for us to lend,” Sandeep Varma, Chief Executive Officer, CGTMSE had told FE Aspire.
SC/ST entrepreneurs were supported under the government’s Stand-Up India scheme until their inclusion in CGTMSE. The Stand-Up India scheme was launched in April 2016 to promote entrepreneurship among the SC/ST and women. The scheme facilitates bank loans between Rs 10 lakh and Rs 1 crore to at least one SC/ ST borrower and one woman borrower per bank branch, on average, for setting up greenfield enterprise in manufacturing, services, trading sector and activities allied to agriculture.
According to the data shared by the minister of state in the finance ministry Bhagwat Karad in the Rajya Sabha in December last year, a total number of 1,59,961 loans (SC- 23,797; ST-7803; women-128361) were sanctioned till December 2 to entrepreneurs across the country under the scheme since inception.
However, Narra raised concerns about interest rate hikes and multiple fees charged by banks under Stand-Up India since its launch.
“The interest charges have drastically increased. The rate charged by one of the prominent banks is as high as 11.80 per cent whereas, at the time of the launch of the scheme, it was 10.25 per cent. Also, the processing fee was not there earlier, but now they (bank) are charging 0.4 per cent excluding GST. Moreover, an upfront fee of 1.40 per cent is now being charged in addition to an inspection charge of Rs 15,000 per annum which wasn’t there earlier,” Narra explained in his query.
However, Vivek Joshi, Secretary, Department of Financial Services (DFS) in his reply noted that such rates are decided by a bank’s board. “We will see though what can be done.”
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