Revamped small loans scheme to reduce banks’ dependence on collateral: Narayan Rane

Union MSME Minister Narayan Rane today launched the revamped Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme, which will provide guarantee for additional ₹2 lakh crore loans and advances to the micro and small enterprises. The move comes in the wake of ₹9,000 crore allocations to the scheme in the Union Budget 2023-23 to revamp the scheme.

While launching the revamp measures, Rane impressed upon lending institutions to make best use of liberalisation to ensure enhanced lending to the Micro and Small Enterprises (MSE) segment without insisting for collateral, according to a release from the ministry. “Such measures would enthuse bankers to reduce their dependence on availability of collateral security which continues to be a problem for MSEs, especially the first generation entrepreneurs,” Rane added.

“Accordingly, the major revamp measures were launched and disseminated to the lending institutions. The modifications included reduction in guarantee fees for loans upto ₹1 crore by 50% bringing the minimum guarantee fee to the level of 0.37% per annum only. Another major change announced was raising of ceiling for guarantee from ₹2 crore to ₹5 crore and enhancing the threshold limit for claim settlement without initiation of legal action to ₹10 lakh,” the MSME ministry release said.

Speaking on the occasion, Secretary, B B Swain apprised that CGTMSE was also collaborating with various state governments for enhanced guarantee coverage for MSEs in respective States. He exuded confidence that all policy level modifications, along with other initiatives being taken by CGTMSE, would result in greater utilisation of the guarantee mechanism.

SIDBI Chairman and managing director S Ramann said CGTMSE has been taking various initiatives which aim at boosting credit flow to MSEs by making the guarantee scheme attractive for both MSEs as well as for the lenders. He also indicated that CGTMSE would come out with more schemes and assured the lenders that it would always be nimble footed in responding to their requirements.