Bankers are disappointed with Announcement on MSME loans because credit guarantee on MSME loan are not offered by government but by CGTMSE.
Bankers are disappointed with Announcement on MSME loans because credit guarantee on MSME loan are not offered by government but by CGTMSE.
Small Industries development bank of India (SIDBI) issued a guidelines which states that loan guarantee scheme will not be available for businesses having repayments overdue by more than 30 days as on 29th February, 2020.
The head of Public Sector bank (PS) told that they are expecting the guarantee on loans to come from government of India but it has come from CTMSE. As we know that CGTMSE have a caveats, it does not give you full money which is lost.
The interest rates in an emergency funding has been fixed to MCLR+1% for banking companies and at 14% for Non-Banking Financial Companies. Lenders believe that interest are justified as there will be some capital charges during emergency funding. When government guarantees the loan, capital charges is zero but in case of CGTMSE, there will be some capital charges
The guarantee scheme will apply to all additional emergency funds sanctioned to MSME after 1st March, 2020 till 31st August, 2020. The amount of emergency working capital would be:
• 15% of Working capital for loan up to Rs. 1 Crore
• 10% of working capital for loan above Rs. 1 crore to Rs. 25 crore
In case, the emergency fund is not able to cover the six months of salary outgo for employee of MSME. Then, the working capital credit has to be enhanced to the amount of six months of salary outgo. This is to ensure that MSME don’t lay-off any employee due to lack of funds
CGTMSE– Credit Guarantee Fund Trust for Micro and Small Enterprises launches in 2000 is a government initiative by Ministry of MSME together with SIDBI. It provides credit guarantee to lending institutions providing loans to MSME without taking any collateral or third party guarantee. It provides guarantee up to 75% of loan amount subject to maximum of Rs. 37.50 Lakhs for loan above Rs. 5.00 Lakhs to Rs. 50.00 Lakhs and maximum of Rs. 150.00 Lakhs for loan above Rs. 50.00 Lakhs and up to Rs. 200 Lakhs.
MCLR- Marginal Cost of fund-based Lending Rate is an internal benchmark of the bank. It means that rate is determine by the bank depending on the period left for repayment of loan
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