Credit and Finance for MSMEs: The government’s Credit Guarantee Scheme (CGS), which facilitates collateral-free credit flow to micro and small enterprises under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), has recorded a significant 52 per cent jump in loan guarantees in the financial year 2021-22, showed official data. Rs 56,172 crore guarantees were approved under the scheme in FY22, up from Rs 36,899 crore in FY21, indicating a jump in credit requirement for post-Covid business recovery. In comparison to pre-Covid FY20 guarantees approved worth Rs 45,851 crore, the jump in FY22 was 22.5 per cent.
Sharing data in Rajya Sabha, Minister of State for MSMEs Bhanu Pratap Singh Verma also noted the beneficiary count that stood at 7.17 lakh in FY22, 8.35 lakh in FY21, and 8.46 lakh in FY20. “CGTMSE aims to strengthen credit delivery system and to facilitate the flow of credit to the MSE sector, create access to finance for unserved, underserved and underprivileged,” said Verma.
“The jump has been because of an increase in the average ticket size from around Rs 6 lakh to near Rs 7 lakh as MSEs needed more capital to revive their businesses. We expect this growth to be maintained as we are trying to rework the scheme’s parameters to take it to more beneficiaries. There has been a proactive approach from our side to reach out to more lenders,” Sandeep Varma, Chief Executive Officer, CGTMSE told Financial Express Online.
Set up in July 2000, CGTMSE had an initial corpus of Rs 2,500 crore from the government and Small Industries Development Bank of India (SIDBI) which was increased to Rs 7,500 crore with an additional Rs 5,000 crore contributed by the government of India later. The scheme provides a guarantee to loans up to Rs 2 crore, of which up to 85 per cent is guaranteed by the government. There are 146 member lending institutions including banks and NBFCs under CGTMSE.
As of June 30 2022, 61.13 lakh guarantees involving Rs 3,35,321.59 crore were approved since inception.
To address the growing credit requirements of MSMEs through CGTMSE, Finance Minister Nirmala Sitharaman in her budget speech this year had announced that it will be revamped with the required infusion of funds. “This will facilitate additional credit of Rs 2 lakh crore for micro and small enterprises and expand employment opportunities,” Sitharaman had said.