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CREDIT GUARANTEE TO SMEs

  • February 17, 2022
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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CREDIT GUARANTEE TO SMEs

TOPIC: Economy

Context- The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has included non-scheduled urban co-operative banks (NSUCBs), state co-operative banks, and district central co-operative banks as member lending institutions (MLIs) under a scheme that provides guarantee for the collateral-free loans given to micro and small enterprises (MSEs).

Concept-

  • This is beneficial for NSUCBs, which face a higher priority sector lending (PSL) target.
    • The Reserve Bank of India (RBI) had revised the PSL target for all urban co-operative banks from 40 percent to 75 percent by march 2024.

Credit Guarantee Fund Scheme (CGS) for Micro and Small Enterprises

  • It was launched in 2000 by the Government of India (GoI) to make available collateral-free credit to the micro and small enterprise sector.
  • The credit guarantee scheme (CGS) assures a lender that if an MSE unit that has availed itself of collateral-free credit facilities (fund-based and/or non- fund based) fails to discharge its liabilities, then the trust would make good the loss, to the tune of 50- 85 percent of the credit facility.
  • Both the existing and the new enterprises are eligible to be covered under the scheme.
  • The corpus of CGTMSE is being contributed by the GoI and SIDBI in the ratio of 4:1 respectively.
  • The Ministry of MSMEs, GoI and Small Industries Development Bank of India (SIDBI) established a trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement the CGS.
CREDIT GUARANTEE TO SMEs economy
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