Credit and Finance for MSMEs: Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which was jointly set up by the MSME Ministry and SIDBI in 2000 to catalyse the flow of institutional credit to micro and small enterprises (MSEs) will be revamped with necessary funds, said Finance Minister Nirmala Sitharaman in her budget speech on Tuesday. “CGTMSE scheme will be revamped with the required infusion of funds. This will facilitate additional credit of Rs 2 lakh crore for micro and small enterprises and expand employment opportunities,” Sitharaman said.
“There is always a demand for collateral-free loans by MSMEs and Startups. Additional Rs 2 lakh crore under CGTMSE will increase the number of entrepreneurs on one side and will create more jobs on the other side. It’s a great support to MSMEs,” Mukesh Mohan Gupta, Founder and CEO, No Defaulters and President CIMSME told Financial Express Online.
Currently, the guarantee cover available under the scheme is restricted to the credit of Rs 2 crore even though it can be extended beyond that to eligible borrowers. The maximum credit risk borne by CGTMSE is restricted to Rs 1.5 crore, that is, 75 per cent of the amount in default, according to the details available on the scheme’s portal.
“Capitalization of CGTMSE will ease the MSME credit crunch but what’s critical here is speed over quantity. So, the implementation must be done quickly with a willingness and forbearance for mistakes made along the way in the path to doing good. While the budget addresses MSMEs need for debt, it would be great to see initiatives for equity funding in MSMEs, empowering SIDBI’s Fund of Funds approach to seed a class of early and growth-stage equity investors in India’s non-tech MSMEs,” Utkarsh Sinha, Managing Director, Bexley advisors told Financial Express Online.
The government had enhanced the loan disbursal limit under CGTMSE from Rs 1 crore to Rs 2 crore, former MSME Minister Giriraj Singh had said in February 2019, according to a statement by the MSME Ministry. Moreover, the corpus of the scheme was also increased from Rs 2.5 lakh crore to Rs 7.5 lakh crore rupees, the minister had said. As of February 1 in the current financial year, over 5.5 lakh CGTMSE guarantees were approved amounting to Rs 42,429.23 crore, of which 22,863 claims involving Rs 471.39 crore were disbursed, as per the scheme’s data.
“Availability of additional funds under the CGTMSE sector is expected to result in a much-needed boost to the MSME sector and encourage the entrepreneurial culture in the country. Emphasis needs to be provided to ease of deployment of these funds and penetrate to the remote parts of the country to encourage the start-up culture on an inclusive basis,” Manish Mishra, Partner at law firm JSA told Financial Express Online.