Credit and finance for MSMEs: Micro and small enterprises (MSEs) seeking guarantee cover — under the government’s Credit Guarantee fund Trust for Micro and Small Enterprises (CGTMSE) for the collateral-free credit — will have to provide their Udyam registration number (URN) from next year onwards. URN is a permanent identification number for businesses looking to register themselves under the MSME definition revised by the government in 2020 post Covid.
According to a circular ‘Udyam Registration Number Mandatory for Guarantee Coverage’ sent by CGTMSE to all member lending institutions (MLIs) under the CGTMSE scheme on October 17, “this modification in the guidelines will be effective for all the guarantee applications lodged on or after January 16, 2023.”
“As sufficient period has elapsed since the issuance of the gazette notification (revised MSME definition), it has been decided that obtaining URN by the borrower shall be made mandatory for getting guarantee coverage under Credit Guarantee Scheme of CGTMSE,” the circular noted.
A CGTMSE official confirmed the development to FE Aspire. “It wasn’t mandatory so far for borrowers to have Udyam certificate in order to get CGTMSE cover,” the official said on anonymity.
As of October 20, 2022, Rs 45,921 crore across 5.44 lakh guarantees was approved in the current fiscal and 27,609 guarantees were settled. In FY22, Rs 55,217 crore in 7.09 lakh guarantees were approved and 32,963 were settled vis-a-vis Rs 31,349 crore in 6.19 lakh guarantees approved in FY21 and 26,427 settled, according to MSME ministry’s dashboard data.
The circular meanwhile also urged MLIs to make use of the intervening period in encouraging borrowers to obtain URN to become eligible for guarantee coverage.
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.
Importantly, finance minister Nirmala Sitharaman in this year’s budget had announced revamp of the scheme with the “necessary infusion of funds” to facilitate additional credit of Rs 2 lakh crore for MSEs and boost employment opportunities.