Credit and finance for MSMEs: The 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 neared pre-Covid or FY20 levels in the amount of loan guarantees approved. According to the data from the MSME Ministry, Rs 45,043 crore involved in 5.36 lakh loan guarantees was approved in a little over the first half of the current fiscal. In comparison, Rs 45,215 crore across 8.38 lakh guarantees was approved in the entire FY20.
Out of the total guarantees approved as of October 17, 26,940 were settled involving Rs 538 crore vis-a-vis Rs 39,937 guarantees involving Rs 880 crore settled in the complete FY20, data from the ministry’s MSME Dashboard revealed. From FY20 levels, the guarantees had dropped by 26 per cent to 6.19 lakh involving Rs 31,349 crore during the Covid year FY21 but the recovery started in FY22 itself with 7.09 lakh guarantees involving Rs 55,217 crore approved.
CGTMSE was set up in July 2000 with an initial outlay 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. CGTMSE offers guarantees to loans up to Rs 2 crore, of which up to 85 per cent is guaranteed by the government.
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According to Sandeep Varma, Chief Executive Officer, CGTMSE, the growth in CGTMSE takers is due to the increase in average ticket size. “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,” Varma had told FE Aspire.
Importantly, a revamp of the scheme with the necessary infusion of funds was announced by Finance Minister Nirmala Sitharaman in this year’s budget to facilitate additional credit of Rs 2 lakh crore for MSEs and boost employment opportunities.