Transcript SURESH KUMAR SUBRAHMANYAN AND ASSOCIATES

Presented by.
C.A Suresh Kumar Subrahmanyan & Associates
Office: 14 A/11. Manish Nagar
J.P.Road, Andheri (West)
Mumbai 53.
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CGTMSE - IMC/ICSI-08.03.2013. SKS & Associates.
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CGT-CREDIT GUARANTEE FUND TRUST
CGTMSE
 Introduction
 Challenges faced by SMEs
 Objective
 Credit guarantee scheme
 Eligible Lending Institutions
 Risk coverage
 Rehabilitation assistance
 Eligible borrowers
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CGT-CREDIT GUARANTEE FUND TRUST
CGTMSE
 Non – eligibility
 Guarantee fees structure
 Annual Service Fees
 Cost & Interest to the Borrower
 Amendment in October 2012
 Composite all - in guarantee fee
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Introduction - CGTMSE
Launched by Ministry of Micro, Small & Medium Enterprises
Guarantee given to Member Lending Institutions (MLI)
For loans sanctioned with out collateral security and/or third
party guarantee.
Considering the financial requirements of SMEs & practical
hurdles faced by them in raising finance.
CGT guarantees covers for loans sanctioned to a maximum
amount of Rs. 100lacs including fund and non fund based
finances given by MLI.
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Challenges faced by SMEs
Limited available Capital for SMEs
Sustaining through initial years
Difficulties in obtaining Finance from Banks and
other lending institutions
Requirement of collateral securities
Requirement of third party guarantee
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OBJECTIVES OF CREDIT GUARANTEE FUND TRUST
Make available Collateral free Credit facility to SMEs
To strengthen Credit delivery system
To facilitate flow of Credit to SMEs
MLI to give importance for project viability
Secure credit facility purely on primary security of
assets financed
MLI should endeavor to give composite credit to the
borrowers
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Credit guarantee scheme
Available to eligible MLI
For any collateral / third party guarantee free loans
extended to new as well as existing Micro & small
enterprises
Maximum guarantee cover up to 100lacs.
Extent of guarantee cover up to 75/80/85% of Credit
sanctioned
Time limit to apply for covering eligible credit facility
sanctioned in one calendar quarter is before end of
subsequent calendar quarter
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Eligible Lending Institutions
All scheduled commercial Banks
Specified Regional Rural Banks
NSIC, NEDFI, SIDBI which have entered into an
agreement with the trust for the purpose
Eligible lending institutions to enter in to agreement &
become eligible Member Lending Institutions (MLI)
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Maximum Risk coverage
 Up to 75 % (85% for select category of borrowers) of the
defaulted principal amount in respect of term loans
including interest for one quarter
 Outstanding working capital advance including interest
 Time limit - As on the date of becoming NPA or as on
date of filing suit which ever is lower.
 Non qualifying amounts – Penal interest, Service
charge, commitment charge or any other levies/
charges.
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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
lakhs.
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Eligible borrowers
 New and existing Micro and Small Enterprises engaged
in manufacturing or service activity excluding 'Retail
Trade'.
 Loans sanctioned to all activities that come under
service sector as per RBI's guidelines on 'Lending to
Priority Sector' and MSMED Act 2006, except retail
trade are eligible for coverage under the scheme.
 Loans given to small road & water transporters
 Mandatory to have Income tax Permanent Account
Number (PAN)
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Eligible borrowers(contd)
 Additional Credit facilities sanctioned to existing units
can be covered provided no collateral/ third party
guarantee is obtained
 Where part of credit is covered with collateral and part
of facility without collateral security is not eligible if it
is of composite in nature.
 Credit facilities allowed to eligible borrower can be
from various institutions subject to ceiling of 100lakhs
per borrower and subject to maximum eligible amount
of the MLI.
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Eligible borrowers(contd)
 Co-financing to a MSE unit by Financial Institution
with a Commercial Bank is also covered under the
Scheme
 Presently credit facility extended to self-help group is
not covered under the scheme
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Non eligibile borrowers
 Any facility given on the basis of collateral security or
third party guarantee is disqualified for coverage under
the scheme
 The Trust also reserves the right to reject any
application for the guarantee cover, if it deems
necessary
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Guarantee fees structure
 Payable by MLI to the Trust up front
 Guarantee fee to be payable within 30 days from the
date of first disbursement of the facility
 Credits sanctioned up to Rs5lacs - 1%
 Credits sanctioned above Rs 5lacs to Rs 100lacs – 1.5%
 Credits sanctioned above Rs 5lacs to Rs 50lacs – in
North Eastern region 0.75%
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Annual Service fees structure
 Payable by MLI to the Trust
 Credits sanctioned up to Rs5lacs - 0.5%
 Credits sanctioned above Rs 5lacs to Rs 100lakhs 0.75%
 ASF payable before 31st. May of the year.
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Cost & Interest to the Borrower
 Left to the discretion of MLI either to charge to the
borrower or bear these fees by themselves
 Interest rate payable by borrower: MLI shall follow the
guideline issued by the RBI
 Interest rate shall not exceed 3% over and above Prime
lending rate excluding annual service fees
 Primary security should be in the form of Business
Assets. Minimum requirement of Net Assets (AssetsLiabilities) is 1.33 times the loan amount.
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Composite all - in guarantee fee
Sr.
No
Credit facility
Annual Guarantee fee(AGF) {%}
Women, Micro
Enterprises and
units in North East
Region (incl.
Sikkim)
Others
1
Upto Rs.5 lakh
0.75
1.00
2
Above Rs.5 lakhs and upto Rs.100
lakh
0.85
1.00
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Amendment in October 2012
 Exceptions to Third party guarantee obtained by MLI
from:
 Proprietor in case of sole proprietary concern
 Partners in the case of partnership firm/LLP
 Trustees in the case of Trusts
 Karta & coparceners in the case of HUF
 Promoters/Directors in the case of Public/private
limited Companies.
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28/02/2013
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Associates.
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