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CGTMSE: Govt’s collateral-free loan scheme for MSMEs surpasses Rs 1.50 lakh crore

In July last year, the ministry had announced a Memorandum of Association between Udyam and CGTMSE for latter to access the data of MSEs availing the scheme facility across the enterprise and social categories. 

The government’s Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which provides guarantees to lenders for collateral-free loans to micro and small enterprises (MSEs), has surpassed Rs 1.50 lakh crore worth of guaranteed amount in the current financial year in comparison to Rs 1.04 lakh crore in FY23, increasing sharply by 50 per cent, the MSME Ministry said on Friday. 

“This milestone has been an outcome of various strategic initiatives taken by SIDBI, the Ministry of MSME and CGTMSE to facilitate collateral-free lending to Micro & Small Enterprises (MSEs),” according to the ministry. 

CGTMSE was launched back in 2000 for credit guarantee support to lenders and was revised in December 2022 to enable more credit to MSMEs. “The widespread adoption of the guarantee mechanism by lenders has come about due to a number of initiatives taken by CGTMSE like reduction in guarantee fee, raising the eligibility limit of loans for guarantee, relaxing the pre-condition for claim settlement, end-to-end digitisation of the operations leading to “ease of doing business” by the lenders, etc., according to the ministry. 

In July last year, the ministry had announced a Memorandum of Association between Udyam and CGTMSE for the latter to access the data of MSEs availing the scheme facility across the enterprise and social categories. 

Importantly, the finance minister Nirmala Sitharaman in her budget 2023 speech had announced a Rs 9,000 crore fund infusion in the CGTMSE corpus to enable additional collateral-free credit of Rs 2 lakh crore to MSMEs and to reduce the cost of credit by 1 per cent.

Meanwhile, bank credit to MSMEs as of November last year stood at Rs 23.36 lakh crore under priority sector lending, growing by 21.9 per cent from Rs 19.16 lakh crore deployed in November 2022, as per the data on sectoral deployment of bank credit by the Reserve Bank of India (RBI). In October 2023, Rs 23.15 lakh crore was deployed in MSMEs under priority sector lending. 

Rs 23.36 lakh crore deployed during November was 14.9 per cent of Rs 155 lakh crore non-food credit deployed by banks during the month vis-a-vis 14.8 per cent of Rs 128 lakh crore non-food credit in November 2022.