MSME Minister Narayan Rane on Wednesday launched a special scheme for informal micro enterprises (IMEs), which are exempted from the Goods and Services Tax (GST) regime, to access collateral-free loans up to Rs 20 lakh under the government’s Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).
The scheme ‘Special Provision for Informal Micro Enterprises under Credit Guarantee Scheme’ enables micro or nano enterprises with credit support from lenders and aims “at moderating the credit risk perception,” the MSME Ministry said in a statement.
According to the circular pertaining to the scheme issued by CGTMSE to all its member lending institutions (MLIs) on February 14, up to 85 per cent guarantee cover will be provided to lenders for unsecured loans up to Rs 20 lakh to IMEs registered on the Udyam portal.
“The special provisions are intended to meet the requirements of the demand side as well as supply side. Member Lending Institutions are expected to lend more resulting in increased credit flow to IMEs in MSE sector,” the circular read.
Launched back in 2000, CGTMSE, which offers guarantees to lenders for collateral-free loans to micro and small enterprises (MSEs), had recently surpassed Rs 1.50 lakh crore worth of guaranteed amount in the current financial year in comparison to Rs 1.04 lakh crore in FY23, increasing sharply by 50 per cent, as per the MSME Ministry.
Importantly, the finance minister Nirmala Sitharaman in her budget 2023 speech had announced a Rs 9,000 crore fund infusion in the CGTMSE corpus to enable additional collateral-free credit of Rs 2 lakh crore to MSMEs and to reduce the cost of credit by 1 per cent.
At the time of filing this report, nearly 1.41 crore IMEs were registered on the Udyam portal out of the total 3.74 crore registered MSMEs.
To enable IMEs register with the Udyam portal and get access to priority sector lending (PSL) benefits, the government under its MSME formalisation project had launched the Udyam Assist Platform in January last year.
UAP was initially discussed in a report by the standing committee on finance headed by Jayant Sinha, Member of Parliament and former Minister of State for Finance in April 2022. The intent was to also seamlessly connect IMEs to the fast-emerging digital ecosystem including platforms like GeM, TReDS, other digital marketplaces, etc.