Help Center
Locate us
CGTMSE Scheme - Loan, Fee, Full Form, Eligibility
Explore a wide range of Working Capital and Business Loan offerings. Open a Current Account now
Popular Products
Show More
Quick Help
Show More
Frequently Asked Questions
Show More
Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.
Success
Failure
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme is a financial safety net for small businesses. It offers a shield against business uncertainties by guaranteeing micro and small enterprises credit facilities. If you are wondering about its eligibility, loan coverage, or the full form, this article is for you.
CGTMSE Full Form and Meaning
Serving as a financial safeguard, its full form encapsulates its purpose – Credit Guarantee Trust Fund for Micro and Small Enterprises. Established in August 2000, the Credit Guarantee Fund Trust Fund for Micro and Small Enterprises (CGTMSE) is a pioneering initiative of the Indian Government, operating under the Ministry of Micro, Small and Medium Companies and the Small Industries Development Bank of India (SIDBI).
This scheme addresses a crucial entrepreneurial need by allowing enterprises to secure non-collateral loans. Acting as the guarantor, the Government covers a substantial portion of the sanctioned loan. It supports existing and nascent businesses across various sectors, offering credit assurances of up to Rs.5 Crore. The coverage, ranging from 75% to 80%, is determined by factors like loan amount and the applicant's profile. With minimal interest rates and a structured fee system, CGTMSE propels the growth of micro and small enterprises.
How CGTMSE Works?
The CGTMSE scheme is a protective shield for lenders dealing with micro and small enterprises. It offers credit guarantees, easing the apprehensions of financial institutions and banks. These entities act as intermediaries in this mechanism, facilitating the scheme's implementation. Their role involves assessing the creditworthiness of businesses and disbursing loans, with the CGTMSE stepping in to guarantee against potential defaults.
This collaboration ensures businesses categorised as micro and small enterprises receive the necessary financial support. The scheme encompasses various types of loans, including term loans and working capital facilities, providing a comprehensive safety net for lenders and borrowers alike. By mitigating the risks associated with lending to smaller enterprises, the CGTMSE scheme encourages financial institutions to support the growth and development of these businesses, contributing to the overall economic landscape.
Also Read: Government loan schemes for small businesses
Eligibility Criteria for CGTMSE
Here are the eligibility criteria for CGTMSE:
Loan Coverage and Amount
The CGTMSE scheme offers a financial umbrella covering various types of loans, including term loans and working capital loans. This inclusive approach supports both new and existing enterprises, promoting a diverse range of businesses. The maximum CGTMSE coverage limit reaches up to Rs.500 lakh, providing substantial financial backing to eligible micro and small enterprises.
Guarantee Fee Structure
The CGTMSE scheme employs a structured guarantee fee system based on the loan amount, with varying rates for different credit facilities. For loans up to Rs.10 lakh, the Annual Guarantee Fee (AGF) is 0.37% plus GST of the credit facility or the actual sanctioned amount, whichever is higher. The fee for loans exceeding Rs.10 lakh and up to Rs..50 lakh is 0.55% plus GST, while amounts ranging from above Rs.50 lakh to Rs.100 lakh increase to 0.60% plus GST.
Additionally, for loans above Rs.100 lakh up to Rs.200 lakh, the AGF is 1.20% plus GST; for loans above Rs.200 lakh up to Rs.500 lakh, it is 1.35% plus GST. Notably, women, SC/ST, Micro Enterprises, ZED certified Units, and Units covered in the North East Region & Aspirational Districts qualify for an additional 10% discount on the applicable guarantee fee.
Borrowers and financial institutions share the responsibility of paying this fee. Borrowers remit it upfront, while financial institutions collect and remit it to CGTMSE. This CGTMSE fee structure significantly influences the cost of borrowing for Micro and Small Enterprises (MSEs), providing a safety net without unduly burdening their financial obligations.
Small and medium enterprises aspiring to benefit from the CGTMSE scheme must complete a structured application process:
Step 1: Register your business entity and secure necessary approvals and tax registrations. Without government registration, loan application is not possible.
Step 2: Develop a comprehensive business plan, including the business model and financial projections. Submit this plan to Kotak Mahindra Bank, determining loan eligibility.
Step 3: Alongside the business plan, submit a CGTMSE application with requisite details, downloadable from the official website (CGTMSE.org.in).
Step 4: Kotak initiates the analysis and verification process, adhering to its policies. Loan sanction time varies.
Step 5: Kotak applies to CGTMSE for collateral guarantee. Upon CGTMSE approval, pay the one-time fee and service charges as per the sanctioned loan amount.
Important Note: CGTMSE covers only part of the loan collateral; additional security is required for the remaining credit amount.
Benefits and Impact
The CGTMSE scheme not only safeguards lenders but also fuels economic and social development by empowering micro and small enterprises, driving job creation, and fostering financial stability.
Also Read: Types of business loan in india
Conclusion
The CGTMSE scheme is a lifeline for micro and small enterprises (MSEs), offering financial security and growth opportunities. MSEs should proactively leverage the benefits provided by the scheme to navigate the challenges of the business landscape. The scheme plays a pivotal role in fostering entrepreneurship and contributing to overall economic growth. By providing a credit guarantee, the scheme empowers MSEs to access the funds needed for expansion and sustainability.
You have already rated this article
OK