Coverage of Collateral Free Loans (CGTMSE) --How can you get a loan under CGTMSE? Read full articles

 1. What is quantum of credit facility that can be covered under the Scheme?

Fund and non-fund based (Letters of Credit, Bank Guarantee etc.) credit facilities up to  200 lakh per eligible borrower are covered under the guarantee scheme provided they are extended on the project viability without collateral security or third party guarantee.However, under the "Hybrid Security" product, the MLIs will be allowed to obtain collateral security for a part of the credit facility, whereas the remaining part of the credit facility, up to a maximum of  200 lakh, can be covered under Credit Guarantee Scheme of CGTMSE.

2.  Can a credit facility of over  200 lakh be covered under the Scheme?

Yes, the guarantee cover available will be restricted to credit of  200 lakh even though credit extended is more than  200 lakh to an eligible borrower. In other words, maximum of credit risk borne by CGTMSE is restricted to  150 lakh i.e. 75% of amount in default.

3. What would be the guarantee / service fee that would be payable by the member-lending institution on credit facility sanctioned in excess of  200 lakh?

AGF would be charged on the outstanding loan amount instead of guaranteed amount for credit facilities sanctioned / renewed to MSEs on or after April 01, 2018. Please refer to Circular No. 139/2017-18 and Circular No.141/ 2017-18 (for Retail Trade) available in the website for more details.

4. Can term loan or working capital facility alone be extended by an eligible lender and still be covered under the guarantee scheme?

Yes, a lender can extend either term loan or working capital facility alone and still be eligible for a guarantee cover if it meets the other eligibility parameters. Needless to say, the credit facility extended to a borrower should be without any collateral security and/or third party guarantee.

5. Can a credit facility extended to a borrower against a collateral security be covered under the Guarantee Scheme, if the lending institution relinquishes its rights on the collateral security?

Yes, MLIs will be allowed to obtain collateral security for a part of the credit facility, whereas the remaining part of the credit facility, up to a maximum of  200 lakh, can be covered under Credit Guarantee Scheme of CGTMSE. CGTMSE will, however, have pari-passu charge on the primary security as well as on the collateral security provided by the borrower for the credit facility.

6. Is there any ceiling in respect of interest to be levied on the credit facility advanced to the borrower if the same is to be covered under the Scheme?

Any credit facility which has been sanctioned by the lending institution with the maximum interest rate not more than 14% p.a. and 18% p.a. including cost of guarantee cover/(Average Base Rate decided by the trust from time to time as applicable to RRBs prior to 01/08/2017.) would be eligible for coverage under CGS I and CGS II respectively.. This supersedes the existing guidelines of CGTMSE on ceiling of interest rate that could be charged by MLIs on guaranteed loans (Refer Circular no. 131) .The revised guidelines on ceiling on Interest Rate that could be charged for the guarantee covered credit facilities would be applicable also to those MLIs who would not be eligible for enhanced credit guarantee coverage from  100 lakh to  200 lakh

7. Is it possible to cover credit facilities, which have already become NPA?

No, the credit facility that has already become NPA cannot be covered under the Scheme.

8.Is CGTMSE collateral free loan?

Purpose. The purpose of the Coverage of Collateral Free Loans (CGTMSE)is to provide collateral free loans up to Rs. 200 lakhs (Up to Rs. 100 lakhs for Retail Trade) to Micro and Small Enterprises, as defined under MSMED Act, 2006.

9Can I get loan without collateral?

Most personal loans require no collateral, including a personal loan by Bajaj Finserv. In other words, they are unsecured loans that you can get without submitting any asset as security.

10.How can I get a loan under CGTMSE?

Obtain Sanction for Bank Loan

Submit the business plan or project report with the necessary banks that provide loan under CGTMSE Scheme and request for sanction of bank loan from Banks providing loan under CGTMSE Scheme. The request for a bank loan can contain term loan and working capital facilities.

11Are MSME loans collateral free?

The Scheme covers collateral free credit facility (term loan and/ or working capital) extended by eligible lending institutions to new and existing micro and small enterprises up to Rs. 100 lakh per borrowing unit.

12.Who is eligible for MSME loan?

Private companies, sole proprietors, private companies engaged in trading, manufacturing or services sector are eligible to apply for an SME loan. The applicant should be engaged for a minimum of 3 years in the business concerned and at least 5 years of experience in the business

13.Is CGTMSE fee refundable?

In case of pre-closure / request for refund, refund of proportionate annual guarantee fee (GF/AGF/ASF) will be allowed only where closure is marked in CGTMSE system / refund requested is within 3 months from the date of receipt of fee by CGTMSE.

14.Is Mudra loan covered under CGTMSE?

When you avail the Mudra loan or financing via CGTMSE, it is important to remember that you are liable for repayment as per the terms of the lending institution. While the agency and trust operating both these loan schemes offer a credit guarantee to the lender, you still need to repay the loan.

15.Is Udyog Aadhaar mandatory for CGTMSE?

Udyog Aadhaar Number Mandatory for Guarantee Coverage

Please refer to our Circular No. 134 dated December 08, 2017 advising that feeding of Udyog Aadhaar Number(UAN)/Aadhaar Number of the promoter is mandatory for submitting application for guarantee coverage.