CGTMSE To Cover Retail Trades & Collateral Loans also

CGTMSE Coverage extended to Retail Trade & Collateral Loans also – Now Retail Trades & partial collateral loans may be covered under Credit Guarantee Scheme of CGTMSE. A decision in this regard taken under “Rebooting CGTMSE” organized by Ministry of MSME and CGTMSE on February 20, 2018.

Following modifications were recommended for implementation :

  1. Charging Annual Guarantee Fees (AGF) on Outstanding Loan Amount rather than sanction amount.
  2. Expanding the Coverage of the Credit Guarantee Scheme (CGS) to cover MSE Retail Traders segment.
  3. Allowing loans with Partial Collateral Security “Hybrid Security” under Credit Guarantee Scheme.  
  4. Increase in the extent of guarantee coverage to 75% from existing 50% for proposals above ₹50 lakh.
  5. Enhancing IT infrastructure of the Trust to improve operational efficiencies and reduce the turnaround time for claim settlement.  
  6. Augmentation of the corpus of the Trust from Rs. 2,500 crore to Rs. 7,500 crore
  7. To increase coverage of the loans covered under the credit guarantee scheme from Rs. 1 crore to Rs. 2 crore
  8. To increase coverage of the credit guarantee scheme for loans being extended to micro and small enterprises by NBFCs also.

Know The Financial Resolution and Deposit Insurance Bill (FRDI)

Partial Collateral Security under Credit Guarantee Scheme

The objective of the Credit Guarantee Scheme is to strengthen the credit delivery system and facilitate flow of credit to the MSE entrepreneurs without the hassles of collateral security and / or third party guarantee by enhancing the comfort level of the MLIs.

CGTMSE has introduced a new “Hybrid Security” product allowing guarantee cover for the portion of credit facility not covered by collateral security. In the partial collateral security model, the MLIs will be allowed to obtain collateral security for a part of the credit facility, whereas the remaining part of the credit facility, up to a maximum of ₹200 lakh, can be covered under Credit Guarantee Scheme of CGTMSE.

How To Calculate Security Coverage Ratio ?

CGTMSE will, however, have pari-passu charge on the primary security as well as on the collateral security provided by the borrower for the credit facility.

Guarantee fee will be charged on the guaranteed amount for the first year and on the proportionate outstanding amount subsequently resulting in lower guarantee fee charged to MSEs. 

How Does RBI Rate Cut Impact EMI of Loan ?

The above change of allowing partial collateral security under the ambit of Credit Guarantee Scheme of CGTMSE shall be applicable to fresh credit facilities sanctioned by MLIs on or after April 01, 2018.


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