The government’s collateral-free loan scheme for micro and small enterprises (MSEs) Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has achieved the Rs 1 lakh crore loan guarantee mark in seven months (April-October) of the current fiscal. In comparison, the scheme had approved Rs 1.04 lakh crore guarantees in the entire FY23. The number of guarantees approved last fiscal stood at 11.65 lakh.
The scheme, which provides credit guarantee to banks for extending loans to MSEs without seeking any collaterals, had approved Rs 56,172 crore credit guarantee in FY22, Rs 36,899 crore credit guarantee in FY21, down from Rs 45,851 crore credit guarantee in FY20, indicating decline amid Covid pandemic, FE Aspire had reported earlier this year.
Cumulatively, the scheme has approved a credit guarantee of Rs 5 lakh crore backing 76 lakh MSEs, the MSME Ministry had posted on X in October. CGTMSE was set up in July 2000 with an initial outlay of Rs 2,500 crore which was increased to Rs 7,500 crore with an additional Rs 5,000 crore contributed by the government of India later. CGTMSE offers guarantees to bank loans of up to Rs 5 crore to MSEs.
The scheme offers MSEs a maximum credit guarantee of 85 per cent for loans up to Rs 5 lakh and 75 per cent for loans ranging from Rs 5 lakh to Rs 5 crore. For women entrepreneurs/SC/ST entrepreneurs/MSEs situated in aspirational districts ZED-certified MSEs/person with a disability (PwD)/MSE promoted by Agniveer, the guarantee limit is 85 per cent for loans up to Rs 5 crore, according to the scheme’s details.
To enhance support to MSEs under the scheme, finance minister Nirmala Sitharaman in this year’s budget had announced infusion of Rs 9,000 crore in the CGTMSE corpus, effective April 1, 2023.
However, a survey in October by the industry body FICCI on SMEs involving 610 respondents had reported that collateral-free credit is only on paper and not implemented as banks provide loans only when collateral is offered by SMEs.
“While the government had introduced various schemes and initiatives to support the MSME sector post-Covid, there have been challenges in their implementation and reach…For instance, the CGTMSE scheme has not been effectively accessed by SMEs,” the survey said. It added that banks have been showing hesitancy in providing financing to SMEs, FE Aspire had reported.