Loans for MSMEs: Government to Increase Credit Guarantee to Rs. 50,000 CR

Loans for MSMEs: Government to Increase Credit Guarantee to Rs. 50,000 CR

Congratulations! The government has planned to double the credit guarantee for MSMEs, which means more loans for small businesses. According to various news reports, the government is planning to increase the credit guarantee to up to Rs. 50,000 crores under the Credit Guarantee Fund Trust For Micro and Small Enterprises (CGTMSE). 

What is CGTMSE?

CGTMSE provides financial assistance to MSMEs without the interference of third-party lenders. The scheme covers loan defaults via a guarantee cover in the ratio of 50/75/80/85 percent of the amount loaned. This ensures more lenders participate freely in giving out money to MSMEs. Loans for small businesses can also be easily procured because of this scheme. 

Highlights of CGTMSE

  • Loans up to Rs. 200 lakhs can be given to MSMEs.
  • Special preference is given to women entrepreneurs.
  • Loans are provided to borrowers from Northeastern states, Sikkim and Jammu and Kashmir.

The MSME ministry will be taking help of different banks to facilitate the CGTMSE scheme. In the latest announcement, the government said it will be increasing the credit guarantee to Rs. 50,000 CR from the current 20,000 CR. 

Statement by Mr. A.K Panda, MSME secretary:

We have taken some decisions, we are allowing NBFCs (non-banking financial companies) partial collateral and this year, unlike previous years where, from fund we used to guarantee a credit flow of Rs 19,000-20,000 crore every year for last three years, we plan to cross Rs 40,000 crore, it may touch Rs 50,000 crore.

He also said that MSME Ministry has taken certain concrete steps as part of structural reforms. It is thus expecting about four lakh such credit proposals.

The Ministry is holding discussions with all banks and NBFCs to ensure credit availability to MSMEs for inclusive growth. It is also planning  70,000 units that will generate employment for almost 5 lakh people in 2018.  

Integrating MSME Data with GSTN

The MSME ministry wants to combine their database with the GST Network as Small and medium enterprises comprise 95-96% of the GST Network.

This will help them regulate and also communicate with them about the various facilities they can get under the CGTMSE scheme. A combined database will also ensure that the MSMEs are brought into the formal economy where the government can give them a helping hand in integrating them into a global chain.

To ensure a steady credit flow, the MSME ministry is taking the aid of RBI to ensure that fintech companies, International financial institutions, Micro Finance Institutions, NBFCs to facilitate and promote the growth of SMEs.

What this means for you:

This definitely means more loans for small businesses.

As an MSME, increased credit guarantee will help ensure you get loans easily. You can now undertake more risks for growing and promoting your business with an increased credit cover. 

The Government has brought in several reforms and is making structural changes to ensure that MSMEs continue to grow. The union budget of 2018-19 is a testimony to the benefits MSMEs are expected to receive.

Take a look at some of the best, easiest business loans the government is giving to a small business looking for financial aid. With Instamojo, you can get started with your business in under two minutes! No set-up fee, no hidden charges.


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