CGTMSE - Establishment

Credit Guarantee Fund Trust for Micro & Small Enterprises

• Set up as a Trust in August, 2000 based upon the recommendations of S.L.Kapur Committee.
• Administered by a Board of Trustees
• Government of India and Small Industries Development Bank of India (SIDBI) – Contribution ratio 4 :1
• Operated through Banks / Lending Institutions registered as Member Lending Institutions (MLIs)
• Scheduled Commercial Banks / select Regional Rural Banks (RRBs) / other lending institutions eligible to register as MLIs

Credit Facilities Coverage

Credit facilities eligible under the Scheme

• Credit facility is standard and regular (not SMA)
• Business / activity of the borrower for which the credit facility was granted has not ceased; 
• Credit facility has not wholly or partly been utilized for adjustment of any debt deemed bad or doubtful of recovery, without obtaining prior consent in this regard from the Trust.

Fresh Initiative by CGTMSE

• Retail Trade - at par with other facilities
• Hybrid Security

COVERAGE

Annual Guarantee Fee

• Fees to be paid within 30 days from date of generation of CGPAN or first disbursement, whichever is later. (Guarantee cover start date will be the date of credit of AGF in Trust Account)
• AGF will be charged on the guaranteed amount for the first year and on the O/s amount for the remaining tenure of the credit facility instead of sanctioned limits. (TL – O/s as on 31-Dec, WC- Peak Level O/s in Calendar year)
• Introduction of Risk based fees w.e.f. 01.04.2016 based upon NPA % and Claim  
• Payout Ratio of the respective MLI
  • NPA%= Guaranteed amount of the corresponding NPA accounts / Cumulative guarantees issued by the Trust
  • Claim Payout Ratio= Cumulative claims settled by Trust / Cumulative receipts by Trust (i.e. Fees + recoveries by MLI) 

Annual Guarantee Fees –Guidelines

SR-Standard Rate

These ratios will be calculated as of Sept.30 every year and based upon this premium for next FY will be decided.

CGTMSE Coverage –  A Transition

• Permission for obtaining Hybrid Security
  • Limit upto Rs.500 Lacs can be covered in higher value exposure 
  • 2nd charge on collateral instead of pari passu under Hybrid Model. (No Legal Documentation)
  • Personal guarantee of collateral owner can be obtained.
• Tenure of WC guarantee coverage increased beyond 10 yrs subject to review after 5 yrs. 
• Permission for revival of guarantee cover of closed account with CGTMSE upto next FY.
• Time limit for lodgment of claim increased from 1 year to 3 years of NPA date or expiry of lock in period, whichever is later.
• Payout Cap Clause: Maximum Settlement amount upto 2 times of fees received including recovery remitted during FY.
• Allowed action taken under SARFAESI Act (Instead of obtaining a decree earlier) for claiming 2nd /Final installment after 3 years.

POINTS TO REMEMBER

• No Collateral Related Risk 
• NIL Capital Charge on guaranteed portion of loan.
• Ensure informing CGTMSE Trust of NPA status before the end of next quarter.