Presented by.

C.A Suresh Kumar Subrahmanyan & Associates

Office: 14 A/11. Manish Nagar
J.P.Road, Andheri (West)
Mumbai 53.













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CGT-CREDIT GUARANTEE FUND TRUST
CGTMSE

Introduction
Challenges faced by SMEs
Objective
Credit guarantee scheme
Eligible Lending Institutions
Risk coverage
Rehabilitation assistance
Eligible borrowers



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CGT-CREDIT GUARANTEE FUND TRUST
CGTMSE
Non eligibility
Guarantee fees structure
Annual Service Fees
Cost & Interest to the Borrower
Amendment in October 2012
Composite all - in guarantee fee


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Introduction - CGTMSE
Launched by Ministry of Micro, Small & Medium Enterprises
Guarantee given to Member Lending Institutions (MLI)
For loans sanctioned with out collateral security and/or third
party guarantee.
Considering the financial requirements of SMEs & practical
hurdles faced by them in raising finance.
CGT guarantees covers for loans sanctioned to a maximum
amount of Rs. 100lacs including fund and non fund based
finances given by MLI.

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Challenges faced by SMEs
Limited available Capital for SMEs
Sustaining through initial years
Difficulties in obtaining Finance from Banks and
other lending institutions
Requirement of collateral securities
Requirement of third party guarantee
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OBJECTIVES OF CREDIT GUARANTEE FUND TRUST
Make available Collateral free Credit facility to SMEs
To strengthen Credit delivery system
To facilitate flow of Credit to SMEs
MLI to give importance for project viability
Secure credit facility purely on primary security of
assets financed
MLI should endeavor to give composite credit to the
borrowers

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Credit guarantee scheme
Available to eligible MLI
For any collateral / third party guarantee free loans
extended to new as well as existing Micro & small
enterprises
Maximum guarantee cover up to 100lacs.
Extent of guarantee cover up to 75/80/85% of Credit
sanctioned
Time limit to apply for covering eligible credit facility
sanctioned in one calendar quarter is before end of
subsequent calendar quarter



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Eligible Lending Institutions
All scheduled commercial Banks
Specified Regional Rural Banks
NSIC, NEDFI, SIDBI which have entered into an
agreement with the trust for the purpose
Eligible lending institutions to enter in to agreement &
become eligible Member Lending Institutions (MLI)

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Maximum Risk coverage
Up to 75 % (85% for select category of borrowers) of the
defaulted principal amount in respect of term loans
including interest for one quarter
Outstanding working capital advance including interest
Time limit - As on the date of becoming NPA or as on
date of filing suit which ever is lower.
Non qualifying amounts Penal interest, Service
charge, commitment charge or any other levies/
charges.
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Rehabilitation Assistance
For the unit covered under CGTMSE and becoming sick
due to factors beyond the control of management,
assistance for rehabilitation extended by the lender
could also be covered under the scheme provided the
overall assistance is within the credit cap of Rs.100
lakhs.
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Eligible borrowers
New and existing Micro and Small Enterprises engaged
in manufacturing or service activity excluding 'Retail
Trade'.
Loans sanctioned to all activities that come under
service sector as per RBI's guidelines on 'Lending to
Priority Sector' and MSMED Act 2006, except retail
trade are eligible for coverage under the scheme.
Loans given to small road & water transporters
Mandatory to have Income tax Permanent Account
Number (PAN)
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Eligible borrowers(contd)
Additional Credit facilities sanctioned to existing units
can be covered provided no collateral/ third party
guarantee is obtained
Where part of credit is covered with collateral and part
of facility without collateral security is not eligible if it
is of composite in nature.
Credit facilities allowed to eligible borrower can be
from various institutions subject to ceiling of 100lakhs
per borrower and subject to maximum eligible amount
of the MLI.
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Eligible borrowers(contd)
Co-financing to a MSE unit by Financial Institution
with a Commercial Bank is also covered under the
Scheme
Presently credit facility extended to self-help group is
not covered under the scheme

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Non eligibile borrowers
Any facility given on the basis of collateral security or
third party guarantee is disqualified for coverage under
the scheme
The Trust also reserves the right to reject any
application for the guarantee cover, if it deems
necessary
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Guarantee fees structure

Payable by MLI to the Trust up front
Guarantee fee to be payable within 30 days from the
date of first disbursement of the facility
Credits sanctioned up to Rs5lacs - 1%
Credits sanctioned above Rs 5lacs to Rs 100lacs 1.5%
Credits sanctioned above Rs 5lacs to Rs 50lacs in
North Eastern region 0.75%

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Annual Service fees structure

Payable by MLI to the Trust
Credits sanctioned up to Rs5lacs - 0.5%
Credits sanctioned above Rs 5lacs to Rs 100lakhs 0.75%
ASF payable before 31
st
. May of the year.

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Cost & Interest to the Borrower

Left to the discretion of MLI either to charge to the
borrower or bear these fees by themselves
Interest rate payable by borrower: MLI shall follow the
guideline issued by the RBI
Interest rate shall not exceed 3% over and above Prime
lending rate excluding annual service fees
Primary security should be in the form of Business
Assets. Minimum requirement of Net Assets (Assets-
Liabilities) is 1.33 times the loan amount.
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Composite all - in guarantee fee

Sr.
No
Credit facility Annual Guarantee fee(AGF) {%}
Women, Micro
Enterprises and
units in North East
Region (incl.
Sikkim)
Others
1 Upto Rs.5 lakh 0.75 1.00
2 Above Rs.5 lakhs and upto Rs.100
lakh
0.85 1.00
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Amendment in October 2012

Exceptions to Third party guarantee obtained by MLI
from:
Proprietor in case of sole proprietary concern
Partners in the case of partnership firm/LLP
Trustees in the case of Trusts
Karta & coparceners in the case of HUF
Promoters/Directors in the case of Public/private
limited Companies.


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