Objectives of CGTMSE

Availability of bank credit without the hassles of collaterals/third-party guarantees is a major source of support to first-generation entrepreneurs setting up their own micro and small enterprise (MSE). Keeping this factor in view and to strengthen the credit delivery system and facilitate flow of credit to the MSE sector, the ministry of micro, small & medium enterprises (MSME) launched the Credit Guarantee Scheme (CGS). To operationalise the scheme, the government and Small Industries Development Bank of India (SIDBI) set up the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).

Who are these ‘micro’ and ‘small’ enterprises? As per the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, micro enterprises include – Manufacturing enterprises engaged in the manufacture or production, processing or preservation of goods where investment in plant and machinery does not exceed Rs 25 lakh Service enterprises that are engaged in providing or rendering of services where the investment in equipment does not exceed Rs 10 lakh Small enterprises include – Manufacturing enterprises engaged in the manufacture or production, processing or preservation of goods where the investment in plant and machinery is more than Rs 25 lakh but does not exceed Rs 5 crore Service enterprises that are engaged in providing or rendering of services where the investment in equipment is more than Rs 10 lakh but does not exceed Rs 2 crore

The main objective is that the lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed. The other objective is that the lender availing guarantee facility should endeavour to give composite credit to the borrowers so that the borrowers obtain both term loan and working capital facilities from a single agency.