ENTP PRSNT.
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Transcript of ENTP PRSNT.
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WWW.CGTMSE.IN
A Website Review
- Group 12
Tolani Institute of Management Studies
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INTRODUCTION
CGTMSE- Credit Guarantee Fund Trust for Medium and
Small Enterprises.
Set up by Government of India and Small Industries
Development Bank of India (SIDBI)
Encouraging the entrepreneurs to achieve their dreams.
Giving a boost to MSE sector via credit guarantee
scheme.
Facilitating collateral free credit and merit based lending.
Minimizing Credit Risk in MSE lending.
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OBJECTIVES
Availability of bank credit without the hassles of collaterals / thirdparty guarantees would be a major source of support to the firstgeneration entrepreneurs to realize their dream of setting up a unitof their own Micro and Small Enterprise (MSE).
Keeping this objective in view, Ministry of Micro, Small & MediumEnterprises (MSME), Government of India launched Credit GuaranteeScheme (CGS) so as to strengthen credit delivery system andfacilitate flow of credit to the MSE sector.
The main objective is that the lender should give importance toproject viability and secure the credit facility purely on the primarysecurity of the assets financed.
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Contd..
The other objective is that the lender availing guarantee facility
should endeavor to give composite credit to the borrowers so
that the borrowers obtain both term loan and working capital
facilities from a single agency.
The Credit Guarantee scheme (CGS) seeks to reassure the
lender that, in the event of a MSE unit, which availed collateral
free credit facilities, fails to discharge its liabilities to the
lender, the Guarantee Trust would make good the loss incurredby the lender up to 75 / 80/ 85 per cent of the credit facility.
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CREDIT GUARANTEE
Credit facility to new as well as existing MSEs.
Loan limit raised to ` 1 crore from ` 50 lakhs.
The guarantee cover available under the scheme is to the extent
of 75% / 80% of the sanctioned amount of the credit facility,with a maximum guarantee cap of ` 62.50 lakh / ` 65 lakh.
The extent of guarantee cover is 85% for micro enterprises for
credit up to ` 5 lakh.
The extent of guarantee cover is 80%:(i) Micro and Small Enterprises operated and/or owned by
women.
(ii) all credits/loans in the North East Region (NER).
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LOGO- AN INSPIRATION
Three light blue stripes connecting the word CGTMSE indicate
sources of 'comfort', 'hope' and 'inspiration' the Trust provides and
the Flame indicates the continuous support being provided by the
Trust to the entrepreneurs in realizing their dream of setting up units
of their own.
Yellow color around flame indicates source of energy given by the
Trust to the entrepreneurs for setting up units in the MSE sector
without having to worry about providing collateral security and / or
third party guarantees.
The blue triangular shape resting on the word CGTMSE indicates the
shed of an industrial unit and growth of MSEs in upward direction.
All above things lead to believe that both the word CGTMSE & its
LOGO ensure assured help for the entrepreneurs to set up MSE
units.
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ELIGIBILITY CRITERIA
Eligible lending institutions
Eligible borrowers
Maximum Risk Cover:
-- Of the credit facilities extended by MLIs, Trust shall guarantee,in case of default by the borrower, up to 75 per cent (85% for
select category of borrowers), of the defaulted principal amount
in respect of term credit including interest on principal for one
quarter and / or outstanding working capital advances (inclusive
of interest), as on the date of account becoming NPA, or as on the
date of filing the suit, whichever is lower. Other charges such as
penal interest, commitment charge, service charge, or any other
levies/ expenses shall not qualify for the guarantee cover.
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Contd..
Rehabilitation assistance:
For the unit covered under CGTMSE and becoming sick due to
factors beyond the control of management, assistance for
rehabilitation extended by the lender could also be covered
under the scheme provided the overall assistance is within the
credit cap of Rs.100 lakh.
Non-Eligibility:
Any facility given on the basis of collateral security or third
party guarantee shall be disqualified for coverage under thescheme. The Trust also reserves the right to reject any
application for the guarantee cover, if it deems necessary.
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FEES
Guarantee fee
For credit facility upto Rs.5 lakh, an upfront Guarantee Fee (GF) of 1% of
the amount sanctioned will have to be paid to the Trust by the MLI. For
amounts sanctioned beyond Rs.5 lakh and upto Rs.100 lakh, the GF is 1.5%,
while for credit facility upto Rs. 50 lakh for units in the North Eastern Regionincluding Sikkim , the GF is 0.75% . The GF will have to be paid within 30
days from the date of first disbursement of credit facility by the MLI to a
borrower.
Annual service fee
Guarantee cover extended by CGTMSE in respect of any specific borrowershall be valid provided the MLI concerned pays an Annual Service Fee (ASF)
of 0.50% on the amount guaranteed for credit facilities upto Rs.5 lakh and
0.75% on the amount guaranteed for credit facilities beyond Rs.5 lakh and
upto Rs.100 lakh. Such ASF is to be paid by the MLI on or before 31st May
of that year. The Trust reserves the right to revise the guarantee fee /
annual service fee from time to time.
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Contd..10
Costto the borrower
The Credit Guarantee Scheme leaves it to thediscretion of the MLIs to decide about passing on
the incidence of Guarantee Fee and AnnualService Fee to the borrower or alternatively theymay decide to bear it themselves.
Interest rate payable byborrower
The MLI shall follow the guidelines issued by RBI.However, interest rate shall not exceed 3 per centover and above the Prime Lending Rate of theMLI, excluding the annual service fee.
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CLAIM SETTLEMENT11
Prior to lender (also referred to as MLI) preferring anyclaim on the Trust, there shall be a lock-in-period of 18months from either the date of last disbursement of loanto the borrower or the date of the guarantee cover
coming into force in respect of the particular creditfacility, whichever is later.
The lender shall, however, prefer a claim on thedefaulted account, which has become NPA, immediatelyafter recall of loan and initiation of recoveryproceedings by way of legal action as specified by theTrust from time to time.
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The payment of claim by the Trust under question
does not in any way take away the responsibility of
the borrower to repay the entire amount of
outstanding to the lender. The lender shall exerciseall caution and maintain its recourse to the borrower
for full amount owed by him and effective action for
recovering the amount including such action as may
be suggested by the Trust.
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Appropriation of Residual Recovery:
In case of default, the lenders would exercise the right to
takeover the assets. However, the Trust would have the
priority in appropriation of sale of assets by the lendersbefore making the final settlement of the claim. Therefore,
the amount realized from the sale of assets (residual
recovery) must first be credited in full by the lenders to
the Trust before they can finally claim the remaining 25per cent of the default / guaranteed cap amount.
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SECURITIZATION16
One of the major objectives of the CGTMSE wouldbe to facilitate securitization of the loansguaranteed by the Trust.
Keeping in view the securitization models operatedby the Small Business Administration of USA and inother developed countries, the Trust would endeavor
to facilitate securitization of guaranteed loans in abig way with the facility to investors for tradingthese securities in the secondary debt markets.