Wednesday, 26 April 2017

CREDIT GUARANTEE TRUST FOR MICRO & SMALL ETERPRISES (CGTMSE)

The CGTMSE provides guarantee cover for the credit facilities provided by member lending institutions (MLIs) to Micro and Small Enterprises (both manufacturing and service sectors) through its Credit Guarantee Scheme (CGS). Retail Credit Facilities and Loans to Medium Enterprises (both manufacturing and service sectors) are not covered under the scheme. The purpose of the scheme is to provide hassle free credit to Micro and Small Enterprises which are unable to provide collateral security/third party guarantee to the Bank by providing guarantee cover in these accounts to the Member Lending Institutions (Banks).
ELIGIBILITY FOR COVERAGE UNDER THE SCHEME: The scheme provide guarantee coverage of credit facilities up to Rs.100 lac if following conditions are fulfilled.
a)    Credit facility should be sanctioned without collateral security/ third party guarantee.
b)    At the time of covering the account, the borrower’s account should not be under default.
c)    Borrower should avail credit from a Single Bank/Financial Institution (Single window approach).
d)    Lending should be in accordance with RBI guidelines on Priority sector Credit.
e)    Facilities which are covered under any other scheme like ECGC/DICGC will not be covered.
f)      The lock-in period for lodgment of claim will be 18 months after date of start of guarantee cover or date of final disbursal of term loan (if applicable), whichever is later.
EXTENT OF GUARANTEE COVER: The limit for the guarantee cover as percentage of principal outstanding o date of NPA or o date of filing the claim, whichever is lower.
Sl
Category of Loa Beneficiary & Size of Loan
Percentage
Amount
Maximum
1
Women Entrepreneurs and Enterprises in North Eastern State
    Loan up to Rs.5 Lac   …   …    …     …    …
    Loan up to Rs. 50 Lacs… …    …     …    …
    Loan above Rs.50 Lacs & up to Rs.100 Lacs


85%
80%
50%


1.25                 

25.00   Lac


50.00 Lac
2
Micro Enterprises
    Loan up to Rs.5 Lac   …   …    …     …    …
    Loan up to Rs. 50 Lacs… …    …     …    …
    Loan above Rs.50 Lacs & up to Rs.100 Lacs

85%
80%
50%

4.25   Lac
40.00   Lac
25.00   Lac



50.00 Lac
3
Other Enterprises
    Loan up to Rs.5 Lac   …   …    …     …    …
    Loan up to Rs. 50 Lacs… …    …     …    …
    Loan above Rs.50 Lacs & up to Rs.100 Lacs

85%
80%
50%

4.25     Lac
40.00   Lac
25.00   Lac



50.00 Lac

Rate of Guarantee Fee: The guarantee fee is payable annually. The amount payable annually is composite amount, bifurcation of Upfront Fee and Annual Fee done away with. The Rates for payment of Guarantee Fee are given below:
Credit Limit
Women Entrepreneurs and Enterprises in North Eastern State
Others
Up to Rs.5.00Lac
0.75% p.a.
1.00% p.a.
Above Rs.5.00 Lac & Up to Rs.100.00 lac
0.85% p.a.
1.00% p.a.
Payable within 30 days of approval of guarantee application by CGTMSE or from the date of first disbursement of term loan (if applicable), whichever is later. Annual Fee is to be paid within 31st May, every year. The premium in Fee, over Standard Rate mentioned above, on the basis of higher NPA level and Claim Payout ratios also payable. In case of ACC holder loans up to Rs.2 Lakh, the Guarantee Fees will be borne by the Development Commissioner, Handicrafts. If the guarantee cover is obtained in the mid of the year, proportionate annual charges will be paid for that year. If payment is not made within stipulated period, guarantee cover lapses.

Procedure for covering an account under CGTMSE Scheme:
a.    Sanction the loan without collateral and third party guarantee.
b.    Written request from the borrower to cover his loan account under CGTMSE guarantee to be obtained.
c.     An affidavit from the borrower that he/ she shall not create any charge on the primary security held in the account covered by the guarantee for the benefit of any other account.
d.    The authority from the borrower regarding deduction of upfront fee and annual charges from his account to be obtained.
e.    Submit the information required by CGTMSE in the prescribed form along with your recommendation to your Zonal Office.
f.      The Zonal Office will online submit the application to CGTMSE.
g.    CGTMSE takes a time of 24 hours to process the application. At the time of submitting the application, it generates a reference number, which is to be used for obtaining the Demand Advice Number (DAN), generated by CGTMSE after processing the application.
h.    The branch will send the amount as per DAN to its Zonal Office.
i.      The Zonal Office will then complete the process as per procedure.
j.       All the details will be kept in the document file and noted down in a register.

Period of Guarantee Cover: The guarantee cover will commence from the date of payment of guarantee fee and shall run through as under:
Term Loan & Composite Loans: Tenure of such loan.
Working Capital Loans: 5 years or additional block of five years, if guarantee cover got revived

Invocation of Guarantee (Lodgment of Claim): Following conditions must be fulfilled before lodgment of claim to the Trust.
a)    The Guarantee cover should be in force, i.e. up to date premium paid by the Bank (MLI)
b)    The lock-in period of 18 months from the date of last disbursement or date of payment of first guarantee fee, whichever is later must have been completed.
c)    The account has been classified as NPA as per RBI guidelines.
d)    Subsidy, if any, should have been adjusted before lodgment of claim.
e)    Recovery Suit filed or permission for waiver of legal permitted by the competent authority.

Time Limit for lodgment of Claim: If the account has become NPA within lock-in period, two years from the date of completion of lock-in period (18 months) and if the account has become NPA after lock-in period than two years from the date of NPA.    

Quantum of Claim Amount: The claim amount is paid in two parts. In first part the 75% of guaranteed amount is paid within 30 days from lodgment of claim, if claim is in order. The balance amount of 25% is paid on conclusion of recovery proceedings or three years from date of decree whichever is earlier. Delay in settlement of claim beyond above limit make the Trust liable to pay interest at BR.  

Sharing of Recovery: Any amount recovered after settlement of the claim will be shared with the Trust in the same ratio in which claim was settled.


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