CGTMSE tweak norms to improve credit guarantee process

The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), jointly set up by the government and SIDBI, has tweaked norms to improve credit guarantee process for micro and small enterprises from December 1.

The CGTMSE was set up to improve fund flow to micro and small enterprises that are often unable to provide adequate collateral for taking loans from banks and other lending institutions.

"With a view to improve the credit guarantee processes, it has been decided to capture key information on financial of the borrowers/units," CGTMSE said in a circular.

The financial data with regard to the slabs above Rs 10 lakh has been made mandatory. However, providing data with regard to the slab between Rs 1 lakh and Rs 10 lakh is optional.

The CGTMSE said modifications would be applicable to credit facilities sanctioned on or after December 1, 2018.

The CGTMSE offers a 'hybrid security' product allowing guarantee cover for the portion of the credit facility not covered by collateral security.

In the partial collateral security model, member lending institutions (MLIs) are 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 Rs 2 crore, can be covered under CGTMSE.

MLIs are required to fill the online application form for seeking guarantee coverage to eligible borrowers for the cases sanctioned by them.

Currently, there are 106 MLIs, including public and private sector banks, on the CGTMSE.