Credit and finance for MSMEs: The government’s credit guarantee scheme, which enables collateral-free credit flow to micro and small enterprises (MSEs) under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), has been extended to women and SC-ST entrepreneurs, MSEs certified with the Zero Defect and Zero Effect (ZED) scheme, and MSEs based in aspirational districts in the country. As per NITI Aayog, there are 112 most under-developed districts in the country identified for improving their socio-economic conditions.
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 will be 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 will remain 75 per cent for up to Rs 2 crore loans.
“The revised guideline for the extent of coverage will be applicable to all guarantees approved on or after December 01, 2022. However, this revised guideline shall not be applicable in case of enhancement of existing working capital accounts already covered under guarantee scheme,” the circular read.
CGTMSE offers MSEs guarantee to bank loans up to Rs 2 crore. The scheme was set up in July 2000 jointly by the MSME ministry and SIDBI 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.
“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. With greater coverage available, banks also would be encouraged in lending to these borrowers. Moreover, with India assuming the G20 presidency, the green climate goals will be a matter of prime importance and hence, ZED-certified MSMEs will also benefit,” Sandeep Varma, Chief Executive Officer, CGTMSE told FE Aspire.
Importantly, the guarantee amount approved under the scheme during eight months (April-November) of the current fiscal has already surpassed the entire FY22 guarantee amount. According to the data shared with FE Aspire by SIDBI, the scheme approved guarantees worth Rs 60,377 crore during the first eight months of FY23 in comparison to the Rs 56,172 crore guarantee approved in the entire FY22.