Govt asks banks to avoid dual guarantee for same credit facility for loans upto Rs 10 lakhs to MSEs

New Delhi, Nov 29 (KNN) In a move that would benefit the MSME entrepreneurs, Government has made certain modifications in guarantee application form with regard to credit facilities covered or proposed to be covered under PMMY/MUDRA Guarantee Scheme.

In a circular to the lending institutions, CGTMSE said, “As you may be aware, many of the credit facilities up to 10 lakh to Micro Enterprises which are eligible for coverage under the Credit Guarantee Scheme (CGS) of CGTMSE can now also be covered under Prime Minister Mudra Yojana (PMMY)/MUDRA guarantee scheme through NCGTC Ltd.”

To avoid dual guarantee for the same credit facility/overlap for loans upto 10 lakh to Micro Enterprises, the MLIs will have to confirm that the said credit facility has not been covered under MUDRA guarantee Scheme while applying for the guarantee cover for such proposals to CGTMSE.

CGTMSE clarified that in case of enhancement in credit facilities in working capital type of assistance exceeding 10 lakh, where the guarantee cover for the initial credit facility upto 10 lakh might have been obtained from NCGTC Ltd., the MLI could switch to the guarantee cover under the CGS under CGTMSE provided the MLI approaches for the entire facility i.e. existing coverage plus proposed enhancement after closing the credit guarantee cover under NCGTC guarantee scheme.

Here, date of enhancement will be taken as sanction date for entire credit facility to be covered under CGS and the existing guidelines of CGS pertaining to timeframe for submission of application for coverage will apply.

In case of additional credit facility to a borrower covered under PMMY/MUDRA over and above 10 lakh, MLI is allowed to apply any additional credit facility under CGS.

CGTMSE said the credit facilities eligible for coverage as per extant guidelines of CGTMSE would only be provided guarantee cover.