Credit Guarantee Scheme for Mudra Loans- Credit Guarantee Fund for Micro Units (CGFMU)

By | March 10, 2019

Credit Guarantee Scheme for Mudra Loans- Credit Guarantee Fund for Micro Units (CGFMU)

Introduction to Credit Guarantee Scheme for Mudra Loans:

    • Availing credit facilities for establishing new units under MSME will be difficult. Bankers may find it difficult to sanction new loans to new units as the unit’s ability to repay the loan may be difficult. In case any unit turns to be NPA and if they are not able to repay the loans taken, normally banks fall back on the collateral security or third party guarantee extended by the units at the time of availing the loans. However, for new MSME units especially for Micro units it would be very difficult to offer any collateral security or third party guarantee. Thus establishing a new micro unit is really a challenge for the entrepreneurs, especially for Micro units it is very difficult to provide the security.

    • Considering these difficulties Government of India has designed a credit guarantee scheme for micro units established under MSME Act. This guarantee scheme is “Credit Guarantee Fund for Micro Units (CGFMU)”.

    • Under this scheme CGFMU guarantees the credit facility availed by the Mudra unit. In case of default in repayment by the unit CGFMU comes to the rescue of the bankers and pays the loan amount to some extent. Thus, the lender i.e. the banker is confident of the repayment and will appraise the loan based on the strengths of the unit I.e viability rather than on the security. At the same time the entrepreneurs can also concentrate on the activity rather than on the security.

Eligibility for availing credit guarantee for Mudra units under CGFMU :

      • The micro unit / enterprise should have been established under MSMED Act 2006. The unit may be a new unit or an existing unit i.e. both new or existing units are eligible.

      • The loan should be classified as micro loan and should be extended under “Pradhan Mantri Mudra Yojana (PMMY)”.

      • The lending bank / financial institution should not have obtained any collateral security or third party guarantee while sanctioning the loan.

      • The lending bank / financial institution should not have obtained any additional cover from government / any insurance coverage from any insurance provider / indemnity / guarantee.

      • The interest rates on the loans sanctioned by the lending bank should be as per the guidelines issued from time to time.

      • Guarantee fee payable by the lending bank / financial institution depends on the bank / financial institute.

Maximum amount of loan that can be sanctioned under Mudra are:

S No

Category

Maximum loan that can be sanctioned

1.

Shishu

Upto Rs. 50000/-

2.

Kishor

Above Rs. 50000/- to Rs. 5 lakhs

3.

Tarun

Above Rs. 5 lakhs to Rs. 10 lakhs

Therefore, while establishing an enterprise or availing any credit facilities from Banks focus on the viability of the unit and accordingly proceed and prosper with the Credit Guarantee scheme for Micro units offered by Credit Guarantee Fund for Micro units (CGFMU) .

Note: For details of classification of MSME unit into Micro, Small and Medium enterprises please go through the topic / video on “Udyog Aadhar Memorandum”.

All the best

 

Leave a Reply

Your email address will not be published. Required fields are marked *