Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), a development initiative of Government of India and SIDBI, which facilitates collateral free credit to small industries, has signed a memorandum of understanding with Canara Bank for implementing the scheme of Risk Sharing Facility (RSF) for micro and small enterprises.
The scheme of RSF, part of the World Bank Line of Credit, envisages providing collateral free credit facilities to micro and small enterprises upto Rs 1 crore. It will cover collateral free credit facilities of above Rs 50 lakh and upto Rs 1 crore for which 50 per cent guarantee cover will be provided by CGTMSE and balance 50 per cent risk will be borne by the participating bank, O S Vinod, CEO, CGTMSE told reporters after signing the MoU with Canara Bank, here. CGTMSE provides guarantees to its member lending institutions (MLIs) comprising scheduled commercial banks, regional rural banks, SIDBI among others in respect of collateral free loans upto Rs 50 lakh extended by them to eligible micro and small enterprises. Presently, it has 70 lending institutions registered with it as MLIs.
CGTMSE has earmarked Rs 25 crore for implementation of the scheme on a pilot basis in association with select banks including Canara Bank. CGTMSE has already entered into similar MoUs with banks like Punjab National Bank, Bank of India, United Bank of India, Union Bank of India and Small Industries Development Bank of India (SIDBI) for implementing the scheme.
Vinod said, “We expect that this initiative will provide a fillip to the growth and development of the micro and small enterprises in the country as the scheme would help in providing them higher amounts of credit facility without the hassles of collateral thereby increasing the credit flow to the MSE sector.
Our major focus will be to help micro and small enterprises in accessing institutional finance and employment generation.”
The guarantee fee and annual service fee under the scheme of RSF are lower at 0.75 per cent and 0.375 per cent respectively.
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The number of guarantees approved under the credit guarantee scheme by the trust since its inception in August 2000 has touched 117,842 enterprises for Rs 3,474.73 crore as of September 2008.
For the year 2008-09, the trust has set a target of 50,000 guarantees to be approved with a loan amount of Rs 1,500 crore, Vinod said.