Major PolicyInitiatives

CGTMSE introduced the following major policy changes which made the Credit Guarantee Scheme (CGS) more attractive to MSEs and MLIs that would enable the increased credit flow to MSE Sector:

Increase in the extent of guarantee coverage

For proposals above ₹50 lakh, guarantee coverage has been increased to 75% from existing 50%.

Charging of fee on outstanding loan instead of sanction amount

Charging Annual Guarantee Fee (AGF) on outstanding loan amount rather than sanction amount under CGTMSE. This has been longstanding demand of the Member Lending Institutions (MLIs) and MLIs expect increased uptake in guarantee backed loans with this change. Further, this change will incentivise the disciplined MSE borrowers.

Inclusion of MSE retail trade as eligible activity

Expanding the coverage of the Credit Guarantee Scheme (CGS) to cover ‘MSE Retail Traders’ segment. This would enable considerable scope of expansion as the segment forms a large proportion of the MSE Sector.

Allowing partial collateral security

Allowing loans with partial collateral security under Credit Guarantee Scheme. This apart from bringing larger number of loans under the ambit of credit guarantee would also help in promoting disciplined credit behaviour

Introduction of payout caps

In order to create sustainability of the Trust, cap on total claim settlement introduced, based on the fee and recovery remitted by the MLI during an year.