A revamped credit guarantee scheme for India's micro and small enterprises will come into effect from Saturday, with the annual guarantee fee for loans up to Rs 1 crore getting reduced from the peak 2 per cent to 0.37 per cent, reducing the overall cost of credit for small businesses. The limit on ceiling for guarantees has also enhanced from Rs 2 crore to Rs 5 crore. Credit Guarantee Fund Trust for Micro & Small Enterprises (CGTMSE) has issued guidelines in this regard.
"The limit on ceiling for guarantees has been enhanced from Rs 2 crore to Rs 5 crore. For settlement of claims in respect of guarantees for loan outstanding up to Rs 10 lakh, initiation of legal proceedings will no longer be required," the MSME ministry said. In Budget 2023-24, finance minister Nirmala Sitharaman announced the revamping of credit guarantee scheme for micro and small enterprises with effect from April 1, 2023, with an infusion of Rs 9,000 crore to the corpus to enable additional collateral-free guaranteed credit of Rs 2 lakh crore and the reduction in the cost of the credit by about 1 per cent.
Consequently, the corpus of Credit Guarantee Fund Trust for Micro & Small Enterprises has been infused with a sum of Rs 8,000 crore on March 30, 2023. CGTMSE created a new landmark by touching the milestone figure of approving guarantees worth Rs 1 lakh crore during FY 2022-23, the MSME ministry stated.