The Narendra Modi government has tweaked its credit guarantee scheme for micro, small and medium enterprises (MSME) to extend collateral free credit of up to Rs 2 crore to trading establishments across India. The move, MSME minister Giriraj Singh said, will ease the transitional difficulties of India's unorganised businesses and enterprises while moving to a post-GST organised sector.
The government has enhanced the extent of guarantee coverage for proposals above Rs 50 lakh from 50% to 75%. It has also changed the system of charging annual guarantee fees (AGF) from creditors on the entire sanctioned amount to an outstanding loan amount basis. A system of availing loans on partial collateral security for bigger loans has been introduced.
Ministry officials said that the changes are expected to increase the annual credit offtake from an average of Rs 20,000 crore to Rs 35,000 crore in the short term. The move will benefit 6.3 crore MSMEs which are moving into the formal sector after the introduction of GST, they said.
Recently, the government had increased the corpus of the Credit Guarantee Scheme Fund Trust from Rs 2,500 crore to Rs 7,500 crore.
In the last 17 years, Credit Guarantee Fund Trust for MSE (CGTMSE) has on a cumulative basis approved 30 lakh guarantees covering loans amounting to over Rs 1.44 lakh crore. It has also processed 1,66,578 claims for Rs 4323.39 crore settlement amount.
The government claims that units supported by CGTMSE have generated employment to the tune of 99 lakh and contributed Rs 8,379 crores towards exports.
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