Recapitalisation of Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) - a step in right direction

New Delhi, Feb 2 (KNN) The recent decision of the Government to enhance the corpus fund of CGTMSE to Rs 7500 crore addressed a long awaiting demand of the MSME sector.

The Ministry of MSME has allocated Rs 2000 crore to the Trust in budget 2106-17 and now Rs 3000 crore in the current budget.

However, the website of the Trust is silent on the issue; it has not even mentioned the enhancement in the loans coverage limit to Rs 2 crore!!

On the eve of the New Year Prime Minister Modi had announced the hike in the coverage of loans from Rs 1 crore to Rs 2 crore.

CGTMSE was constituted by the Vajpayee Government to address the collateral barriers in Bank loan to micro and small enterprises.

Under the credit guarantee scheme operated by the trust, Bank loans to MSEs are guaranteed for repayment, even if the borrower fails.

This also eliminates providing of collaterals by the MSE borrower, often they cannot offer due to limited resources.

The guarantee facilitated release of Bank loan to the small rather, micro enterprises.

As on May 31, 2016, a total of 24.31 lakh proposals from micro and small enterprises have been approved for guarantee cover for aggregate credit of Rs 1.13 lakh crore.

However, of late the growth in the guarantee offered has slowed down as the fund became highly leveraged.

It had a corpus of only Rs 2500 crore to cover the Rs. 1 lakh crore plus loans it had underwritten.

Government’s decision to enhance the corpus and immediate provision of Rs 5000 crore additional corpus will resurge the credit coverage by the Trust. (KNN/ DB)