Reduction in Credit Guarantee Fee effective from Mar 1

Mumbai, Mar 5 (UNI) The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has declared that the recently announced reduction of one-time Guarantee Fee (GF) from 1.50 per cent to one per cent and reduction of Annual Service Fee (ASF) from 0.75 per cent to 0.50 per cent under credit guarantee scheme had been given effect from March One.

Finance Minister P Chidambaram made the announcement about reduction in these fees while presenting the Union Budget for 2008-09.

The immediate implementation of reduction in GF and ASF is likely to give an impetus for wider coverage under the Credit Guarantee Scheme for micro and small enterprises (MSEs). CGTMSE plans to take all necessary steps to strengthen its partnership with banks and other Member Lending Institutions (MLIs) for increasing the coverage under the Scheme, according to a CGTMSE release here.

The reduction of GF and ASF for credit facility up to Rs 5 lakh would not only encourage banks to lend at comparatively lower rates but, also bring down the cost of borrowings and provide a boost to credit off-take to the micro and small enterprises (MSEs) sector.

Further, it would enhance the liquidity of the banks as they do not have to make provisions to the extent of the credit facility guaranteed by CGTMSE.

CGTMSE extends 75 per cent guarantee for credit facility up to Rs 50 lakh sanctioned by its MLIs. For loans to Micro Enterprises up to Rs 5 lakh, for Micro and Small Enterprises (MSEs) operated/owned by women and units located in North East Region (including Sikkim), the coverage is 80 per cent of credit facility.

The Trust had already approved 92,072 guarantees amounting to Rs 2,593.84 crore on February 29 with estimated employment generation for over 4.30 lakh persons. Around 86 per cent of these guarantees were to small borrowers with average loan size of below Rs 5 lakh.

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was established by the Government of India and SIDBI to facilitate collateral-free credit facility to the MSE sector.

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