H. General
1. What are the cardinal principles of the Credit Guarantee Scheme?
The cardinal principles of the Scheme are as follows:
i. Only Micro and Small Enterprises engaged in manufacturing activities and those in service sector excluding retail trade are eligible to be covered under the Scheme.
ii. All the credit facility(ies) extended jointly by two or more banks to single borrower or credit facility(ies) extended jointly by two or more institutions to a single borrower, shall not be eligible for guarantee cover except otherwise approved by the Trust. In respect of the credit facility extended jointly by SIDBI and a bank, out of the MSE Fund for NER (North East Region), created by SIDBI subject to conditions.
iii. The entire credit facility has to be given without collateral and/or third party guarantee. Loans may be secured against the primary security which has been defined under the Scheme to include assets created out of the credit facility extended to the borrowers and / or which are directly associated with the business/project of the borrower for which the credit facility has been extended. In those cases where MLIs have already obtained collateral security from the borrowing units to secure existing credit facilities, the collateral security needs to be released before covering under the Scheme any additional credit facility sanctioned to the same borrowing unit.
iv. The rate of interest charged to the unit should not exceed 3% above the Prime Lending Rate (PLR) of the lending institution.
v. The dues of the borrowing unit to the lending institution should not have become bad or doubtful of recovery as on date of issue of guarantee cover.
vi. MLI should obtain the cover for credit facility sanctioned in one quarter before the expiry of next quarter.
2. How is this guarantee scheme operated by the Trust?
The operations of this Scheme are fully computerized using B2B e-business concept to enable the Trust to deliver prompt service to the lenders.
3. What information is required to be submitted to the Trust before starting operations under the Scheme?
Before starting implementation of the Scheme, MLIs are required to give the names and addresses of the Zonal / Regional / Branch offices through which they would like to operate the Scheme. They are also required to furnish the names of a nodal officer and two other officers who will be operating the Scheme at each of the operating offices. On receipt of this information, Member ID and Passwords would be allotted by the Trust, after which it would be possible for MLIs to lodge applications for guarantee cover. Applications are required to be lodged online.
4. Can the Micro and small entrepreneurs / borrowers approach the Trust directly to seek guarantee for the credits sanctioned by the Banks?
CGTMSE gives guarantee to its MLIs. Therefore, entrepreneurs in the Micro and small enterprises sector have to approach the Banks or financial institutions (who have already registered with the Trust as MLIs) with their viable proposals for their credit requirements. The List of MLIs of the Trust can be seen at CGTMSE's web-site at http://www.cgtmse.in or www.cgtsi.org.in
5. Can a Bank / Institution seek single guarantee cover or lump sum guarantee cover for all the loans outstanding in respect of all the eligible MSE borrowers?
No, Single guarantee cover or enblock guarantee cover for all outstanding loans is not permissible. Under the Scheme applications are required to be filed by the MLIs, individually, in respect of each of the borrower. The Scheme provides for coverage of only new loans / renewed working capital limits sanctioned to manufacturing units in the micro & small enterprises in service sector excluding retail trade. The new credits sanctioned by MLIs in a quarter have to be covered under Guarantee Scheme as early as possible, in any case, not beyond the subsequent quarter. The applications are to be submitted by the identified branches, which have been allotted member Id, passwords by CGTMSE, using the member id in CGTMSE website (http://www.cgtmse.in or www.cgtsi.org.in).
6. Will payment of Guarantee Fee on the whole outstanding MSE portfolio of the MLI, with loans up to Rs 100 lakh, is acceptable to CGTMSE?
No, Under the Scheme applications are required to be filed by the Operating Offices of MLIs, individually, for each of the borrower for credit facilities extended.
7. Does CGTMSE have branch offices in other cities in India?
CGTMSE has its Registered Office at Mumbai and Business Development Cells in New Delhi and Kolkata. Since the entire operations are online, CGTMSE is able to cater to the needs of its MLIs from Mumbai.