Credit and Finance for MSMEs: The credit assure fund trust for micro and modest enterprises (CGTMSE), which provides assure cover to banks and other lenders for collateral-no cost lending to micro and modest enterprises (MSEs) in case of default by latter, has seen a 26 per cent drop in the quantity of authorized loans in FY21. According to the readily available information on CGTMSE from the MSME Ministry, 6.19 lakh loans involving Rs 31,349 crore worth credit assure had been authorized in the last monetary year vis-à-vis 8.38 lakh loans involving Rs 45,215 crore in credit assure authorized in FY20. Despite the decline, the quantity of loans authorized in FY21 was the second-highest more than the last seven years (FY15-FY21), the information showed.
FY15-21 loans authorized beneath CGTMSE
Covid battered MSEs had reported short-term closure of operations and restricted organization activity post lockdown in March 2020, as per market estimates. Consequently, the have to have for working capital credit had also contracted even as demand across sectors had plummeted due to lockdown. However, as the financial activity resumed throughout the second half of the year, modest corporations across sectors had lined up looking for emergency credit assistance. The government had announced the Rs 3 lakh crore collateral-no cost emergency credit line assure scheme to allow MSMEs post-pandemic amongst other credit-linked schemes.
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Importantly, the quantity of loans settled throughout FY21 stood at 26,427 involving Rs 565 crore — lowest because FY16. This was 33 per cent down from 39,937 loans involving Rs 880 crore settled in FY20. According to the Reserve Bank of India’s April bulletin, the bank credit deployed to MSEs in February 2021 was highest throughout the 11-month period of FY21 at Rs 11.31 lakh crore. This was up 6.9 per cent from Rs 10.58 lakh crore deployed in February 2020.
CGTMSE provides assure cover to lenders in the ratio of 50/75/80/85 per cent of the credit offered. The extent of assure cover is 85 per cent for micro enterprises for credit up to Rs 5 lakh and 50 per cent for credit from Rs 10 lakh to Rs 1 crore per MSE borrower for retail trade activity, as per the scheme’s portal. Moreover, the extent of assure cover is 80 per cent for MSEs owned and/or operated by females and for all loans up to Rs 50 lakh in the North East Region (NER).