• Posted on: 26 February 2016
  • By: admin

SMEs find it difficult to raise Loans lacking with adequate Collateral Security.  CGTMSE Scheme allows SMEs to borrow from banks without any Collateral Security. The collateral is replaced with the Guarantee given by CGTMSE Trust.


  "Collateral security" means the security provided in addition to the primary security, in connection with the credit facility extended by a lending institution to a borrower.

"Primary security"  in respect of a credit facility shall mean the assets created out of the credit facility so extended and/or existing unencumbered assets which are directly associated with the project or business for which the credit facility has been extended.

    "Eligible borrower" means new or existing Micro and Small Enterprises to which credit facility has been provided by the lending institution without any collateral security and/or third party guarantees.

"Amount in Default" means the principal and interest amount outstanding in the account(s) of the borrower in respect of term loan and amount of outstanding working capital facilities (including interest),  as on the date of the account becoming NPA, or the date of lodgment of claim application whichever is lower.

 

Guarantee By Trust


The Trust undertakes to provide for Guarantee against Credit facility availed by eligible borrower from lending isntitution.The Trust reserves the discretion to accept or reject any proposal. 


Eligible Credit Facilities

The Trust shall cover credit facilities (Fund based and/or Non fund based)  

(i) not exceeding Rs. 50 lakh (Regional Rural Banks/Financial Institutions) and

(ii) not exceeding Rs.100 lakh (Scheduled Commercial Banks and select Financial Institutions)

by way of term loan and/or working capital facilities after entering into an agreement with the Trust, without any collateral security and\or third party guarantees. 

 

 In case Credit facilities extended by more than one bank and/or financial institution jointly and/or separately to eligible borrower, maximum amount eligible for cover is upto Rs.100 lakh.


Credit facilities not eligible under the Scheme:

                  (i)            Any credit facility in respect of which risks are additionally covered under a scheme operated / administered by Deposit Insurance and Credit Guarantee Corporation or the Reserve Bank of India, to the extent they are so covered.

                (ii)            Any credit facility in respect of which risks are additionally covered by Government or by any general insurer or any other person or association of persons carrying on the business of insurance, guarantee or indemnity, to the extent they are so covered.

              (iii)            Any credit facility, which does not conform to, or is in any way inconsistent with, the provisions of any law, or with any directives or instructions issued by the Central Government or the Reserve Bank of India, which may, for the time being, be in force.

               (iv)            Any credit facility granted to any borrower, who has availed himself of any other credit facility covered under this scheme or under the schemes mentioned in clause (i), (ii) and (iii) above,  and where the lending institution has invoked the guarantee provided by the Trust or under the schemes mentioned in clause (i), (ii) and (iii) above, but has not repaid any portion of the amount due to the Trust or under the schemes mentioned in clause (i), (ii) and (iii) above,  as the case may be, by reason of any default on the part of the borrower in respect of that credit facility.

                 (v)   Any credit facility which has been sanctioned by the lending institution against collateral security and / or third party guarantee.

               (vi)  Any credit facility which has been sanctioned by the lending institution with interest rate more than 3% over the Prime Lending Rate (PLR) of the lending institution. 


Guarantee Fee and Annual Service Fee

 

               (i)  One-time guarantee fee to be paid upfront to the Trust by the institution availing of the guarantee within 30 days from the date of first disbursement 


              Credit facility upto Rs. 5 Lakh @ 1.00%

              Credit facility above Rs. 5 Lakh @ 1.5% of the credit facility sanctioned 

 

 

             (ii)            The annual service fee be paid by the lending institution within 60 days ie. on or before May 31, of every year.

              Credit facility upto Rs. 5 Lakh @ 0.50% 

              Credit facility above Rs. 5 Lakh @ 0.75%  


The amount equivalent to the guarantee fee and / or the service fee payable by the eligible lending institution may be recovered by it, at its discretion from the eligible borrower.


Extent of the guarantee

           

            The Trust shall provide guarantee as under :

 

 

 

Category

 

 

 

Maximum extent of Guarantee where credit facility is

 

Upto Rs.5 lakh

Above Rs.5 lakh upto Rs.50 lakh

Above Rs.50 lakh upto Rs.100 lakh

Micro Enterprises

85% of the amount in default subject to a maximum of Rs.4.25 lakh

75% /

Rs.37.50 lakh

Rs.37.50 lakh plus 50% of amount in default above Rs.50 lakh subject to overall ceiling of Rs.62.50 lakh

Women entrepreneurs/  Units located in North East Region (incl. Sikkim)other than credit facility upto Rs.5 lakh to micro enterprises

 

 

80% of the amount in default subject to a maximum of Rs.40 lakh

Rs.40 lakh plus 50% of amount in default above Rs.50 lakh subject to overall ceiling of Rs.65 lakh

All other category of borrowers

75% /

Rs.37.50 lakh

Rs.37.50 lakh plus 50% of amount in default above Rs.50 lakh subject to overall ceiling of Rs.62.50 lakh