Presentation of CGTMSE

Credit Guarantee Fund Trust forMicro and Small Entreprises

(CGTMSE)

Presentation on Credit Guarantee Scheme

MSE as defined in MSMED Act 2006

Micro and Small Enterprises (MSE) in India

MSE is governed by the MSMED Act 2006

More than 26 million units Registered / Unregistered MSEs

Provide employment to more than 60 Million persons

Largest employment generating sector after agriculture

Employment potential at low capital cost

Constitute 95% of industrial units

Key contributors to national economy

45% of manufacturing output

40% of total exports

8% of Gross Domestic Product

Products of MSEs

Food products36%

Chemical & Chemical Products

22%

Basic Metal Industry

12%

Metal Products10%

Electrical & Machinery

Parts8%

Rubber & Plastics

Products6%

Others6%

More than 6000 products

CGTMSE Establishment & Corpus

Set up as a Trust in August, 2000 and administered by Board of Trustees

Government of India and Small Industries Development Bank of India (SIDBI) – the settlors – Contribution ratio 4 :1

Initial Corpus – Rs.125 crore ; Present Corpus – Rs.2158.79 crore ; Committed Corpus – Rs.2500 crore

Objectives of CGTMSE

Shift from collateral to merit based lending

Act as catalyst of entrepreneurship promotion

Facilitate institutional credit flow to MSE sector

Address growth constraints of MSE sector

Enable financial inclusion / employment generation

Revive confidence in credit guarantee mechanism

Micro & Small Enterprises as per MSMED Act eligible

Both Manufacturing and Service sectors covered

Credit Facility up to Rs.100 lakh covered

All fund / non-fund based facility covered

Maximum Cover of up to 85% of credit facility

All credit facility must be extended without any collateral security

Credit for retail trade, educational / training institutions and SHGs are not eligible for coverage.

Credit Guarantee Scheme (CGS)Salient Feature

Borrower Category

Maximum Guarantee Cover, where Credit facility is

Upto Rs.5lakhAbove

Rs.5lakh to Rs.50lakh

Above Rs.50lakh to Rs.100lakh

Micro Enterprises85% of the amount in default / Rs.4.25lakh

75% of amount in default / Rs.37.5lakh

Rs.37.50lakh plus 50%of amount in defaultabove Rs.50lakh /Rs.62.50lakh

Women Entrepreneur / units located in North Eastern Region (Incl. Sikkim)

80% of amount in Default / Rs.40 lakh

Rs.40lakh plus 50% ofamount in defaultabove Rs.50lakh /Rs.65lakh

All other category of borrowers

75% of amount in Default / Rs.37.5lakh

Rs.37.50lakh plus 50%of amount in defaultabove Rs.50lakh /Rs.62.50lakh

Extent of Guarantee cover

Facilitating Collateral-free Credit to Micro & Small Enterprises

CGS – Tenure of Cover

Tenure of Guarantee Cover for Term Credit, Combined WorkingCapital & Term Credit and Composite Credit is tenure of TermCredit / Composite Credit or loan termination date, whicheveris earlier

Where Working Capital facility alone is covered, the tenure isfor a block of five years or loan termination date, whichever isearlier. Thereafter, MLI should apply for renewal of GuaranteeCover

If tenure of Term Loan is 3 years, tenure of working capital willalso be 3 years. After 3 years, if guarantee cover is to becontinued for working capital, application for renewal to belodged online


CGS – Application Lodgment

For credit facility sanctioned in a particular quarter, application forGuarantee Cover should be lodged by the end of the next quarter

In case of Working Capital Credit, date of renewal / review /enhancement can be taken as date of sanction

In case of credit facility secured by collateral, application can belodged after release of collateral, subject to time limits specified forapplication lodgment

Account should not have become overdue / bad / doubtful ofrecovery / adjusted for debts deemed bad or doubtful of recovery ason date of application / payment of guarantee fee


CGS – Guarantee Fee

On approval of Guarantee Cover, Demand Advice for Guarantee Feeand is to be paid upfront for commencement of Guarantee Cover

In enhancement cases, Guarantee Fee is calculated on pro-rata basisfor residual tenure of guarantee

In case of working capital, payment is to be made within one monthfrom Demand Advice date and in case of term credit, one monthfrom date of first disbursement / demand advice date, whichever islater


CGS – Annual Service Fee

Annual Service Fee (ASF) is to be paid for all accounts for whichGuarantee Cover has been availed / is in force in a financial year, atthe beginning of the next financial year i.e., ASF is collected in“arrears” and is calculated pro-rata for the first and last years.

If payment is not received within stipulated period, Guarantee Coverlapses and account is liable to be closed. Annual Service Fee is to bepaid till disbursement of first installment of claim

Present Service Fee rate is 0.50% of credit facility sanctioned forloans upto Rs.5 lakh and 0.75% of credit facility sanctioned for loansabove Rs.5 lakh


Cost of Cover

Credit Facility

Upfront Guarantee FeeAnnual Service

Fee North East

Region(incl. Sikkim)

Others

Upto Rs.5 lakh 0.75% 1.00% 0.50%

Above Rs.5 lakh & upto Rs.50 lakh 0.75% 1.50% 0.75%

Above Rs.50 lakh & upto Rs.100 lakh 1.50% 1.50% 0.75%


MLI is at their discretion may pass on the cost of Guarantee cover to the borrowers.

However, responsibility of payment of Guarantee / Service Fee to the Trust will be on MLIs

CGS – Handicraft Artisans

Guarantee Fee / Annual Service Fee in respect of credit facilitiessanctioned to artisans in the handicrafts sector and covered underthe Credit Guarantee Scheme are reimbursable by Office of DC(Handicrafts)

Disbursement date / amount to be indicated while entering thedetails to enable system to appropriate the fee

Guarantee Fee for eligible cases from April 01, 2009 is beingappropriated out of the fund.

For earlier cases, MLI’s may inform in writing to enableappropriation of Annual Service Fee out of the fund.


CGS – Claim Settlement

Two stage claim settlement process

First installment of 75% of guaranteed portion of Amount in Defaultwill be paid within 30 days of receipt of complete information

Interest at prevailing Bank Rate will be paid in case of delay beyond30 days

Second installment shall be paid on conclusion of recoveryproceedings

On conclusion of recovery proceedings, final loss is shared byCGTMSE and MLI, in the ratio ranging from 85 : 15 to 62.5 : 37.5, asthe case may be


CGS – Claim Settlement

Amount in Default - Outstanding in the account, both principal &interest, as on date of NPA or the date of lodgment of the claimapplication, whichever is lower, subject to maximum of amountguaranteed

Recoveries made after NPA date / payment of first installment ofclaim should be remitted to CGTMSE after deducting legalexpenses, if any

MLI’s may use OTS / Compromise settlement route for recovery.CGTMSE has to be informed if such settlement is negotiated


CGS – Benefits

Credit Guarantee Scheme - A tool for

Widening of credit portfolio

Better management of risk

Faster recovery of dues

Enhancement of profitability


Role of Credit Guarantee

A weak project cannot be turned into a viable one with guarantee

cover and is only an additional comfort to the lender, as is collateral

security

Banks should evaluate credit applications by using prudent

banking judgment / due diligence / business discretion in

supporting only viable projects under the Credit Guarantee

Scheme and conduct the account(s) of the borrowers with normal

banking prudence


CGTMSE Performance

YearNo. of Active MLIs

No. of Credit Facilities Approved

Amount of Guarantees Approved

(Rs. Crore)

Cumulative Guarantees Approved

(Rs. Crore)

FY 2000-01 9 951 6.06 6.06

FY 2001-02 16 2296 29.52 35.58

FY 2002-03 22 4955 58.67 94.25

FY 2003-04 29 6603 117.60 211.85

FY 2004-05 32 8451 267.46 538.62

FY 2005-06 36 16284 461.91 1000.53

FY 2006-07 40 27457 704.53 1705.06

FY 2007-08 47 30285 1055.84 2701.59

FY 2008-09 57 53708 2199.40 4824.34

FY 2009-10 85 150034 6875.11 11,559.61

FY 2010-11 106 254000 12589.22 23846.01

FY 2011-12 109 243981 13783.98 37139.31

FY 2012-13* 113 60008 3576.84 40559.00

As on June 30, 2012

CGTMSE Performance (Top 10 MLI’s)– as on June 30, 2012

MLI Proposals Approved Amount (in Rs. Lakh)

1 STATE BANK OF INDIA 166003 700926.93

2 BANK OF INDIA 96366 595564.02

3 PUNJAB NATIONAL BANK 89520 410442.44

4 CANARA BANK 63815 213545.80

5 INDIAN OVERSEAS BANK 56740 247825.80

6 ALLAHABAD BANK 37072 142692.27

7 UNION BANK OF INDIA 28662 107864.63

8 BANK OF BARODA 26631 216396.15

9 CENTRAL BANK OF INDIA 24462 156529.80

10 UNITED BANK OF INDIA 24046 97926.29

SNo.

CGTMSE Performance (Top 10 States)– as on June 30, 2012

SNo. State Name Proposals Approved Amount (in Rs.

Lakh)

1 UTTAR PRADESH 116557 432620.31

2 KERALA 81089 187852.32

3 WEST BENGAL 75242 301456.56

4 TAMILNADU 69984 318762.6

5 KARNATAKA 69190 342592.32

6 ORISSA 47885 189998.67

7 MAHARASHTRA 47042 408532.22

8 GUJARAT 42326 359221.13

9 RAJASTHAN 37577 141749.12

10 BIHAR 36771 138339.9

CGTMSE

We welcome suggestions, advice andother inputs to improve our services

Contact us at :Credit Guarantee Fund Trust for Micro and

Small Enterprises7th Floor, MSME Development Centre

Plot No.C-11, ‘G’ BlockBandra Kurla Complex

Mumbai-400051Phone : 022-26541803-07, 61437800 (24 lines)

Fax : 022-26541821E-mail: [email protected] : www.cgtmse.in

Documents

Presentation of CGTMSE