A major fillip to raise unsecured working capital support to micro enterprises exempt from the Goods and Services Tax (GST) has been given by the Ministry of Micro, Small and Medium Enterprises (MSME) which came out with the “CGTMSE MSE 2.0” under the Credit Guarantee Scheme (CGS). Launched by Minister MSME Narayan Rane, this particular scheme shall substantially enhance credit access in the form of an unsecured loan guarantee of up to Rs 20 lakh which shall be available even to micro units who are not registered under the GST net.
“CGTMSE MSE 2.0” Specifically, the scheme is tailored for micro enterprises under the Micro, Small and Medium Enterprises Development (MSMED) Act but registered under the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) which are outside GST net, a move which according to analysts is a strategic step that shall ensure easier credit access which shall trigger growth and innovation in the vital sector.
Key Highlights of the CGTMSE Draft Circular
In A Nutshell From a draft circular dated February 14, circulated by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), it comes to the fore that up to 85% guarantee coverage of member lending institutions (MLIs), including non-banking financial companies (NBFCs), is in play for loans extended to Information Memory Engraved (IME) MSMEs registered on the Udyam Portal.
These are loans without collateral under the “CGTMSE MSE 2.0” promising that admissible tenure shall not exceed five years. Flexible Guarantee Fee Structure The guinea mark within the innovative scheme resides in a flexible guarantee fee structure introduced for lending institutions on a block basis (Monthly-Quarterly-Half yearly-Yearly) based on the amount outstanding in the loan account, reckoned as on the earlier of the review date of the guarantee coverage period or the due date of an installment of principal and/or interest.
Also Read: MSME Money Talk: Sources & Challenges in India
Enhanced Efficiency and Impact of CGTMSE 2.0 on Micro Enterprises
The novelty aims to rationalize the process by curtailing the guarantee release time to 50% of the extant time, thereby going on to the extent that the process shall be made 50% less onerous than is presently provided under the erstwhile formula, truly augmenting the ease of credit flow to IME MSEs. The new CGTMSE 2.0 promises to be a game-changer for MSME financing in more ways than one. This forward-looking MSME financing scheme is a wake-up call to the challenges of micro enterprises, especially those that may not fall under the GST net.
By releasing the credit flow and substantial financial support (as high as 90% in special cases of women-run units), this new-age scheme could easily become the harbinger of next-gen micro-enterprises in every nook and corner of the broad avenues of the micro-enterprise landscape across India. This shows the government’s sincere commitment to empowering the MSME sector — the sector that is pivotal to the success of the neighborhood economic model, of creating national employment opportunities – a model road map of composite understanding of the requirement of micro-units, the need to infuse fresh credit life into the system to balance the regional imbalance by delivering finance to these unit of India’s economy that till now did not have GST’s soft, financial underbelly and partner India to the Allahabad Bank’s new chapter of nationwide growth.
This is ramp-up season for spreading the roots of a new, modern and Aatmanirbhar (self-reliant) India with MSMEs growing at 12% in numbers to 63 million units a few months ago already. Indian units in the informal sector and the MSMEs in reserved statute are now also poised on an MSME financing reform highway from here to economic recovery and from that to a higher growth, sustained and long-term economic growth.
Also Read: GST and the MSME Sector
FAQs:
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What is the CGTMSE MSE 2.0 scheme launched by the Ministry of MSME?
The CGTMSE MSE 2.0 scheme is an initiative launched by the Ministry of Micro, Small and Medium Enterprises (MSME) to provide unsecured working capital support to micro-enterprises exempt from GST.
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How does the CGTMSE MSE 2.0 scheme aim to support micro-enterprises exempt from GST?
The scheme offers an unsecured loan guarantee of up to Rs 20 lakh, even to micro units not registered under the GST net, thus providing them with easier access to credit.
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What is the maximum loan guarantee amount provided under the CGTMSE MSE 2.0 scheme?
The maximum loan guarantee amount provided under the CGTMSE MSE 2.0 scheme is up to Rs 20 lakh.
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Who is eligible to benefit from the CGTMSE MSE 2.0 scheme?
Micro enterprises under the Micro, Small and Medium Enterprises Development (MSMED) Act but registered under the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) and outside the GST net are eligible to benefit from this scheme.
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How does the flexible guarantee fee structure work under the CGTMSE MSE 2.0 scheme?
The flexible guarantee fee structure is based on the outstanding loan amount and is payable on a block basis (Monthly-Quarterly-Half yearly-Yearly) as per the review date or due date of installments.
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What are the key highlights of the draft circular issued by CGTMSE regarding loan guarantee coverage?
The draft circular outlines up to 85% guarantee coverage for loans extended to Information Memory Engraved (IME) MSMEs registered on the Udyam Portal, without collateral under the CGTMSE MSE 2.0 scheme.
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Can non-banking financial companies (NBFCs) also participate in the CGTMSE MSE 2.0 scheme?
Yes, member lending institutions (MLIs), including non-banking financial companies (NBFCs), are eligible to participate in the CGTMSE MSE 2.0 scheme.
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How does the CGTMSE MSE 2.0 scheme streamline the process of guarantee release for micro-enterprises?
The scheme aims to reduce guarantee release time by 50%, making the process less onerous and ensuring easier credit flow to micro-enterprises.
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What are the special provisions for women-run units under the CGTMSE MSE 2.0 scheme?
Women-run units may receive substantial financial support, up to 90%, under the CGTMSE MSE 2.0 scheme in special cases.
- How does the CGTMSE MSE 2.0 scheme contribute to the growth and innovation of micro-enterprises in India?
By providing easier access to credit and substantial financial support, the scheme can foster growth and innovation in micro-enterprises, ultimately contributing to the overall development of the MSME sector in India.
