LENDING TO MSE SECTOR UNDER CGTMSE SCHEME - EMERGING THREAT AND CHALLENGES FOR THE BANKERS

Ramamoorthy Muthaiah

Abstract


MSEs or Micro and Small Enterprises form the backbone of an economy. In India, MSEs have been picking up pace for past few years now. Though while acknowledging the significance of small businesses, banks do hesitate in extending loans to the first generation entrepreneurs. Owing to the inability of providing adequate collateral security against loans, micro and small enterprise owners face hurdles in having access to bank credit. Taking this into account, the government introduced the Credit Guarantee Fund Scheme for MSEs  in August, 2000, wherein   an Entrepreneur  can avail loan without offering any collateral security and  third party guarantee It also targeted at lowering the hindrances to credit flow to Micro and Small Enterprises .The objective of this scheme was to reduce the problem of collateral security. Further , CGTMSE  in the current year   has  proposed  to   go for  many changes  including temporary suspension of CGTMSE scheme coverage   to some banks  due to  very high level of NPAs under CGTMSE  scheme accounts  ,reported by some of the Banks. This paper  attempts  to  study and discuss  the  various  changes  proposed by CGTMSE and  its impact  on MSE sector’s lending  and future challenges for the Bankers to extend credit  under the said scheme .


Keywords


Micro and Small Enterprises; Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE ); Non-Performing Asset (NPA); Member Lending Institutions(MLI); Credit Guarantee scheme (CGS); Guarantee fee(GF); Interest Rate Cap; Base Rate(BR); Annual S

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References


Credit Guarantee Fund Trust for Micro and Small Enterprises scheme

CGTMSE Circular No. 71/2013-14 dated December 17, 2013

CGTMSE circular CGTMSE/03/177 dated April 17, 2015

CGTMSE circular CGTMSE/44/255 dated April 28, 2015

CGTMSE circular CGTMSE/44/2365dated July 15, 2015

CGTMSE circular CGTMSE /44/630 dated September 30,2015

CGTMSE circular CGTMSE /44 , November 16, 2015

RBI Master Circular - Lending to Micro, Small & Medium Enterprises (MSME) Sector RBI/2010-11/79 RPCD.SME & NFS.BC.No.9/06.02.31/ 2010-11,July 1, 2010


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