No Collateral for Loans up to Rs 5 Crore for Micro and Small Enterprises

Guarantee fee only for loans exceeding the value of the collateral if it is given

At the G20 summit, Prime Minister Narendra Modi said that the micro, small and medium sector accounts for 50 percent of global production and 60-70 percent of employment. This sector also plays an important role in India. In this year's Union Budget, Rs 9,000 crore has been earmarked for the loan guarantee scheme for micro-enterprises. Out of this, 8000 crore rupees are used on March 30, 2023, to provide loans up to 5 crore rupees to banks and other financial institutions from April 1st of that year without any collateral of land or anything else.

            Earlier, this limit was Rs.2 crore. Some basic information about CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) scheme which benefits entrepreneurs as no collateral is required.

• Ø  This scheme is implemented by the Guarantee Trust constituted by SIDBI or Small Industries Development Bank of India. Get the benefit of this scheme by seeing micro and small enterprise loans under this. The Central Government guarantee scheme applies to short-term loans for working capital and long-term loans for the purchase of assets.
• Ø  Small scale enterprises are enterprises with production investment up to 5 crores and annual turnover up to 50 crores. Micro units operate at a smaller level than these. With production capital up to Rs 1 crore and turnover up to Rs 5 crore.
• Ø  The central government's Udyam registration will increase the acceptance of enterprises among banks. This scheme helps all such entrepreneurs to take loan amounts of up to 5 crore without any collateral.
• Ø   A minimum standard of fees is also fixed under the auspices of the Central Government. These charges will be levied at annual intervals. Banks and other institutions have the freedom to carry it themselves or to collect it from the borrowing units.
• Ø  This fee is charged on an annual basis and will reduce proportionately as the loan amount is reduced when the loan is repaid. This means that you have to pay the fee for the entire loan amount taken in the first year, while in the subsequent years, you only have to pay the fee for the repayment amount.
• Ø  Membership in the scheme is open to banks and bank counterparty financial institutions. They are called Member Lending Institutions. All banks are members of this scheme. Therefore, under this scheme, bank loans are not required to provide collateral for loans up to Rs.5 crore.

• Ø  Member NBFCs are also obligated to provide unsecured loans to micro and small enterprises. A list of such institutions and other information is available on the website : www.cgtmse.in