To support Micro and Small Enterprises (MSEs) owners, the Goa state government officially launched the Goa Credit Guarantee Scheme on January 11, 2024, in convergence with the Centre's Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). The scheme in tandem with Centre, aims to provide risk mitigation to banks and financial institutions offering collateral-free loans up to Rs 5 crore to small businesses. MSE owners face the hard challenge of securing timely and adequate credit at reasonable interest rates due to the credit risk banks perceive. Now Goa state government has initially allocated Rs 10 crore towards this risk coverage.
Under the scheme, banks and financial institutions will receive guarantee cover to sanction collateral-free loans to eligible Micro and Small Enterprises (MSE) units, helping them get easy credit. These units, engaged in various activities, including manufacturing, servicing and trading, can avail loans up to Rs. 5 crore.
Understanding CGTMSE and its Impact on Small Business Owners
The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE) is a broader initiative launched by the Centre to facilitate collateral-free credit for the micro and small enterprise sectors. The scheme covers both existing and new enterprises and is implemented through a trust called Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), jointly run by the Centre and the Small Industries Development Bank of India (SIDBI).
A total of 151 institutions, including Public Sector Banks, Private Sector Banks, Regional Rural Banks, Foreign Banks, and institutions like NSIC, NEDFI, and SIDBI, can lend under this scheme. The lending amount depends on the category of the lending institution, with Public Sector Banks having a higher lending cap compared to Regional Rural Banks or similar institutions.
The guarantee cover provided under CGTMSE is up to 75 per cent to 80 per cent of the sanctioned amount of the credit facility, with a higher limit for micro-enterprises (up to Rs. 5 lakh), MSEs owned or operated by women, and all loans in the North-East Region. In case of default by the owner, the Trust settles the claim up to the specified percentage of the outstanding amount, ensuring a safety net for lenders and easy credit for borrowers. In some states, like Goa, the remaining portion of credit is secured by the state governments.
Businesses availing loans under this scheme have to pay an annual guarantee fee to the Trust, ranging from 0.37 per cent for loans up to Rs. 10 lakh to 0.55 per cent for loans between Rs. 10 lakh and Rs. 50 lakh. Over 11,000 guarantees worth Rs 1 lakh crore have been approved in 2023.
