Cgtmse

Introduction to CGTMSE

➢Government of India and SIDBI jointly set up Credit Guarantee Fund Trust for Small

Industries(CGTSI)in2000.

➢The GOI and SIDBI as settlors of the Trust have committed a corpus of ₹ 2,500 crore in

theratioof4:1totheCGTMSE,outofwhich ₹1,906crorehasbeencontributedtodate.

nd

➢Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE) w.e.f. 2 July

2007.

BankhasthreemajorbenefitsinCGTMSEcoverageloanaccount.

1. ‘Zero’riskweightforguaranteecoveravailable.

2. NPAAccounts,noprovisioningforcoverportion.

3. In the NPA account claim settlement to the extent of 75% of the eligible amount is

Immediatewithin30days.AMENDMENTS IN CGTMSE 

SCHEME 2018

ThemajoramendmentsintheSchemeareasunder:-

a) Expanding the Coverage of the Credit Guarantee Scheme (CGS)

tocovertheMSERetailTraderssegment.

b) Charging Annual Guarantee Fees (AGF) on outstanding loan

amountratherthanthesanctionedamount.

c) Allowing Loans with partial collateral security under Credit

GuaranteeScheme.

d) Increase in the extent of guarantee coverage to 75% from the

existing 50% forproposalsabove ₹50 Lakhs.MODIFICATION IN CGTMSE IN 

APRIL 2023

CGTMSE has recently brought out following

modifications in the existing guarantee scheme as

below:

1. Increase in ceiling of coverage from ₹ 2 Cr. To ₹ 5 Cr.

2. Reduction in Annual Guarantee Fee (AGF).

3. Increase in the threshold for waiver of Legal Action

to ₹ 10 Lakhs & option for claim settlement in single

instalment.ELIGIBILITY CRITERIA

All MSE Loan sanctioned limit up to ₹ 500 lakh applicable all guarantees

approved on or after April 01, 2023.

Account should be Standard & Regular (not reported SMA as per RBI

Norms) as on application date.

Loans under Consortium are not eligible under the scheme.

Loans to SHGs are not eligible under the scheme.

FITL accounts & partial conversion of WC to WCTL accounts are NOT

ELIGIBLE.

Producer Organization (PO) & FPO are ELIGIBLE if credit facilities are not

for core agricultural activities.

Wholesale Trade & Educational Institution ELIGIBLE to be covered under

the scheme.

Both Term Loan and Working Capital are covered.

Both Fund Based & Non-Fund Based covered.ROI, GUARANTEE & 

COLLATERAL SECURITY

➢For loans up to ₹ 10 Lakh, no collateral security or third party guarantee

should beobtained,tobeeligible underthescheme.

➢For loans above ₹ 10 Lakh, no third party guarantee is allowed but partial

collateral security may be obtained. The details of the same have been explained in

circular,undertheHybridmodelofthescheme.

❖From 31.10.2018, CGTMSE has removed the rate of interest limit cap of 14% for all

eligibleloanaccounts.

❖All existing and new MSE Accounts covered under CGTMSE and without any

collateral security with a limit of up to ₹ 100 lakhs will be eligible for 0.5% interest

concession.

❖Lock-in period is 18 months from the date of the last disbursement of the loan or

thedateofpaymentoftheguaranteefeewhicheverislater.LOAN SANCTION LIMIT

❖A borrower can be given the benefit of coverage only once in his/her lifetime

under CGTMSE cap of ₹ 500 lakh is removed by 06 December 2019 notification.

Now the borrowers can avail of incremental credit facilities (i.e. to the extent of

reduction in the outstanding exposure limit) under Credit Guarantee Scheme of

CGTMSE, subject to a maximum cap of ₹ 500 lakh.

❖In case an account which had been sanctioned earlier had been omitted

to be covered under the scheme, only Working Capital accounts of such

borrower can be covered at the time of review/renewal of accounts.

❖Where the borrower is enjoying several distinct credit facilities, one or

more out of the same can be covered up to the Eligible Amount (presently ₹

500 Lakhs).

❖Allowing guarantee coverage anytime during the tenure of Loan, provided the

credit facility was not restructured/remained in SMA2 status in the last 1 year

from the date of submission of application.

❖If additional credit facilities are sanctioned, Fresh applications have to be

submitted for an additional limit.APPLICATION FOR

GUARANTEE COVER 

➢Application for Guarantee cover lodged online through

Zonal Office designated as Nodal Offices.

➢The Bank is required to pay the guarantee fee within 30

days from the date of first disbursement of the credit

facility (Not Applicable for Working Capital) or 30 days

from the date of Demand advice (CGDAN) of guarantee

fee whichever is later or such date as specified by the

CGTMSE.

➢Other Charges such as interest in a term loan, Penal

Interest, Commitment Charge, Service charge or any other

expenses shall not qualify for guarantee cover.GUARANTEE COVER LIMITATION

➢The Guarantee Cover shall run through the entire agreed tenure of

the Term Credit in case Term Loan, sanctioned alone for the defaulted

principalamount.

➢The guarantee cover for Cash Credit alone will be renewed thereafter

for a block of 5 years each, from the original cover start date for

outstanding (inclusive of interest) or on the date of submission of claim

whicheverisless.

➢CGTMSE has decided to remove the tenure cap of 10 years for

coverage of working capital facilities under the Credit Guarantee

SchemefromMarch18,2020.EXTENT OF GUARANTEE COVER 

AVAILABLE W.E.F. 01/04/2023

Category Up to ₹ 5.00 More than ₹ More than ₹ 50.00 lakh 

lakh 5.00 lakh to  ₹ to ₹ 500.00 lakh

50.00 lakh

Micro Enterprises 85%  of amount 75%  of amount 75% of amount default 

default amount default amount amount Max. ₹ 375.00 Lakh

Max. ₹ 4.25 Max. ₹ 37.50 

Lakh Lakh

MSE Located in UT of J&K/ UT of 80% of amount default amount 75% of amount default 

Ladakh/ NE Region Max. ₹ 40. Lakh amount Max. ₹ 375.00 Lakh

Women/SC/ST/PwD/MSE 85% of amount default amount Max. ₹ 425.00 Lakh

promoted by Agniveers/ MSE 

situated in Aspirational District/ 

ZED Certified MSEs

All others 75% of amount default amount Max. ₹ 375.00 LakhGUARANTEE FEE (WEF APRIL 01, 2023)

In pursuit of revamp of Credit Guarantee Scheme to increase flow of credit to MSEs, it has

been decided to bring down the cost of guarantee. Further, guarantee fees to Retail /

Wholesale Trade is made at par with other activities. The revised the Annual Guarantee Fee

(AGF) structure under Credit Guarantee Scheme (CGS -I) applicable to all the guarantees

approved/ renewed on or after April 01, 2023 is given in the table below.

Standard Rate with Risk 

Slab Standard Rate (%pa)* Premium  (%pa)*

0-10 lakh 0.37 0.63

Above 10-50 lakh 0.55 0.94

Above 50-1 crore 0.60 1.02

Above 1-2 crore 1.20 2.04

Above 2-5 crore 1.35 2.30

*Above 2-5 Crore 1.35 AGF will be charged on the guaranteed amount for the first year

and on the outstanding amount for the remaining tenure of the credit facility.FEE SHARE IN BOI

Limit Fee Share

With effect from 01/01/2013

st

Limit up to ₹ 50 lakh. 1 year 100% shared by bank, from next 

year borrower has to pay.

st

Limit above ₹ 50 lakh  to ₹ 1 year 50% shared by bank, from next 

100 lakh. year borrower has to pay.

Limit above ₹ 100 lakh Fully born by the borrower.

PMEGP/ Women/ SC/ST/ 100% shared by bank for entire period.

Minority/ Unit in NER/  J&K 

up to ₹ 100 lakh.DELEGATION OF SANCTION

(HOBC No. 116/085 DT. 27/06/2022)

1. No collateral should be accepted in case of loans up to ₹ 10 lakh extended to units in

the MSE sectors Sanctioning authority should cover all loans up to ₹ 10 lakh

extended to Micro & Small Enterprises and are eligible for coverage under guarantee

scheme of CGTMSE or other approved institutions such as CGFMU without any

exception.

2. Sanctioning authority may consider proposals with CCR 60% & above for all

accounts which are above ₹ 10 lakh and otherwise eligible under CGTMSE, without

obtaining CGTMSE coverage.

3. Proposals under Hybrid Security Product (irrespective of level of CCR) may be

considered by sanctioning authority.

4. For Proposals above ₹ 10 lakh and proposed to be covered only under CGTMSE, the

delegation rests with the Sanctioning Authority (No prior clearance required).

5. In case of borrowers are not inclined to take CGTMSE coverage and No Collateral or

CCR is less than 60% then delegated authority to approve waiver of CGTMSE cover

will be vested with ZLCC onwards.TAKE OVER OF ACCOUNTS 

COVERED UNDER CGTMSE

a) Takeover of accounts from other Banks, already covered under

CGTMSE is allowed under CGTMSE Hybrid Model only as a fresh sanction

and guarantee coverage will be available only for maximum cap of ₹ 200

Lakhs per borrower.

b) No accounts are permitted for takeover, if it is proposed to be covered

under CGTMSE only.

Restructurinq of CGTMSE accounts — Intimation to CGTMSE:

In case of any Restructuring/Rephasement/Modification in original terms

of sanction, the same is to be reported to CGTMSE. Non-reporting may

lead to the termination of CGTMSE guarantee cover.CGTMSE MODULE IN FINACLE

➢AnewmenuCGTMSEhasbeendevelopedinFinacle.

➢CGTMSEmenuisavailableforstandardloan&CCA/conly.

➢Accounts required to modify ACM-V(MIS Code) for CGTMSE

GuaranteeCoverCodeas‘7’.

Application Entry: A- Application Detail:- Branch has to enter &

verify the application data. ZO/HO official will update the

application online by his user id and print the report by web

portalofCGTMSE.

Updation of CGPAN: U- Updation of CGPAN:- After getting

CGPAN from GTMSE, ZO advice the branch and branch update

guaranteestartdate,ExpirydatethroughU.CGTMSE MODULE IN FINACLE

NPAReporting:N-NPAReporting:-IfanaccountslippedtoNPA,

Branch has to report through option N. ZO will generate the

report and update on CGTMSE website. Branch has to report

onorbeforelastdayofNextQuarter.

Submission of Claim: C- Claim:- Branch has to report the claim

through ZO by using C-Claim. Before claiming the credit

facility has been recalled and the recovery proceeding have

been initiated under due process of law. Mere issuance of

recall notice under SARFAESI Act cannot be construed as

initiation of legal proceedings for purpose of preferment of

claim under CGS. Lending institution should take further

actionascontainedinSection13(4)oftheaboveAct.CGTMSE GUARANTEE INVOKATION PERIOD

Guarantee of CGTMSE in respect of accounts covered under CGTMSE may be

invoked ifthefollowing conditionsare satisfied -

a) Within a maximum period of one year from date of NPA, if NPA is after lock in

period or within one year of expiry of lock-in period, if NPAis within lock-in period

foraccountssanctioned before01.01.2013.

b) The Branch/Bank can invoke the guarantee in respect of credit facility within a

maximum period oftwo years from date of NPA, if NPA is after lock-in period

or within two years of expiry of lock-in period, if NPA is within lock-in period, for

accountssanctioned onorafter01.01.2013 butturned NPAbefore15.03.2018.

c) The Branch /Bank can invoke the guarantee in respect of credit facility within a

maximum period of three Years from the date of NPA, if NPA is after lock in

period or within three years of expiry of lock in period, if NPA is within lock in

period for accounts turned NPA on or after 15.03.2018, irrespective of sanction

date.WAIVER OF LEGAL ACTION IN NPA ACCOUNTS

➢For the purpose of the scheme, the issue of notice under Lok Adalat is sufficient

to prove that legal proceedings have been initiated for the cases where the total

default is up to ₹ 20 lakhs only.

➢Waiver of Legal action in respect of smaller loans: CGTMSE has waived the pre-

condition of initiation of legal proceedings for invoking of guarantees where the

aggregate outstanding amt. considered eligible for claim settlement by CGTMSE

does not exceed ₹ 5 lakh for those claims lodged on or after 02.01.2023.

➢Now, CGTMSE has revised the threshold for waiver of legal action to ₹ 10 lakh

per claim for claim lodged on or after 01.04.2023.

➢In all such cases, where the filing of legal proceedings is waived, a committee

headed by an officer, not below the rank of Assistant General Manager of MLI

should examine all such accounts and take a decision for not initiating legal

action and filing claim under the Scheme. The report of such a committee may

be submitted along with the claim application.CGTMSE CLAIM SETTLEMENT OFFER 

IN NPA ACCOUNTS

Further, CGTMSE has decided to offer MLIs two options for

claim settlement at the time of claim lodgement for cases

where waiver of legal action is applicable.

❖Option-1: Single instalment of claim settlement with

reduced extent of guarantee by 15%. Eg: in respect of extent

of coverage of 75%, reduced coverage would be 60%, 80%

would be 65% likewise.

❖Option-2: Existing claim settlement process in two

st

instalment i.e. 75% 1 instalment and 25% after 3 years as

nd

2 instalment.CGTMSE MODULE IN FINACLE

Settlement of Claim: S- Settlement:- Settlement of claim is to be entered and

verified by this menu. The CGTMSE shall pay 75% of guaranteed amount within 30

days.

Thebalance 25%will bepaid onconclusion of recoveryproceeding or after 3years

from decree of recovery, whichever is earlier. Any amount realized from sale of

security should be remitted in full to the corporation after deducting our expenses

etc.

Upgradation: UG- Upgradation:- Upgradation of account reported through this

menu.

Restructured: RS- Restructured:- Restructured of account reported through this

menu.

ReportingofclosedA/C:CL-ReportingofclosedA/c

AvailableReports:MISRPT=>CGTMSE

The consolidated reports can be generated to monitor CGTMSE portfolio in

HO/ZO/BRANCH.