Cgtmse Latest

Credit Guarantee Fund Trust
for Micro and Small

Enterprises (CGTMSE)
1
By
Kamal Patencha
Bank of Baroda
11/12/2022
"colorful flying bird”
Objective - Availability of bank credit without the hassles of collaterals / third party
guarantees would be a major source of support to the first generation entrepreneurs to realize
their dream of setting up a unit of their own Micro and Small Enterprise (MSE).
*Source:- https://www.cgtmse.in/Home
Revised MSME Classification – MSMED Act 2006 (w.e.f.01.07.2020)
Sector Manufacturing & Services
Micro Enterprise
The investment in Plant and Machinery or Equipment does not exceed
one crore rupees AND turnover does not exceed five crore rupees
Small Enterprise The investment in Plant and Machinery or Equipment does not
exceed ten crore rupees AND turnover does not exceed fifty
crore rupees
Medium Enterprise The investment in Plant and Machinery or Equipment does not
exceed fifty crore rupees AND turnover does not exceed two
hundred and fifty crore rupees
Udyam Registration Certificate on https://udyamregistration.gov.in portal is mandatory
PAN No. is not required up to Rs.5.00 lacs limit
Page | 5
Introduction
 Medium Enterprises are not covered.
 Credit facilities (FB/NFB) to a borrower in Micro & Small Enterprise sector for credit
facilities up to Rs. 200.00 lakhs.
 Retail trade sector covered up to Rs.100 lacs.
 Banks can apply for guarantee cover anytime during the tenure of loan (loan was not
restructure/remained in SMA2 status in last -1- year from date of submission of
application)
Page | 6
Introduction
What is Primary & Collateral Securities ?
Third Party Guarantee.
Tenure of the guarantee coverage.
Partial / Hybrid security coverage
Page | 7
Scenario-1 for Hybrid Models
What will be the Guarantee Limit ?

Term Loan Sanctioned: 2 Crore
Collateral value: 1 Crore

Maximum guarantee Coverage:
Fee Calculation
Outstanding as on December 31 for Term Loan is 1. 8 Crore.
Amount on which fee will be calculated:
Page | 8


Maximum guarantee Coverage: (2 crore less 1 Crore) = 1 Crore
Fee Calculation
Amount on which fee will be calculated: 1.8 (outstanding) – 1 (collateral Value) = 0.8 Crore
The fee will be calculated on 0.8 Crore Claim Limit
Maximum Limit would be on which fee is paid = 0.8 Crore
Page | 9

Working Capital Loan Sanctioned: 1.8 Crore
Fee Calculation
Outstanding in case of Working Capital is 1.9 Crore
Page | 10

Working Capital Loan Sanctioned: 1.8 Crore
Maximum guarantee Coverage: 1.8 crore less 1 Crore = 0.8 Crore
Fee Calculation
Expected Outstanding in case of Working Capital is 1.9 Crore
Amount on which fee will be calculated: 1.9 (outstanding) – 1 (collateral Value) = 0.9 Crore (guarantee cover
is 0.8 crore- The fee will be calculated on 0.8 Crore, subject to maximum of guarantee amount)
Claim Limit Maximum Limit would be on which fee is paid = 0.8 Crore
Page | 11


Fee Calculation
Page | 12


Maximum guarantee Coverage:(2 crore less 1 Crore) = 1 Crore
Fee Calculation
1 (outstanding) – 1 (collateral Value) = 0
Therefore, no fee will be calculated, and case will be closed
Page | 13
Term Loan Sanctioned: 5 Crores

Fee Calculation
Outstanding as on December 31 for Term Loan is 4. 00 Crores.
Claim Limit:
Page | 14

Maximum guarantee Coverage: 2 crore(since 2 crore is the maximum guarantee Limit. In case of RRB, it
will be 50 lakh)
Fee Calculation
4 (outstanding) – 1 (collateral Value) – 2 (unsecured Portion) = 1 Crore
The fee will be calculated on 1 Crore
Claim Limit: Maximum Limit would be on which fee is paid = 1 Crore

Page | 15

will be 50 lakh)
Fee Calculation
Page | 16

will be 50 lakh)
Fee Calculation
3 (outstanding) – 1 (collateral Value) – 2 (unsecured Portion) = 0
Therefore, No fee will be calculated and case will be closed.
Page | 17
CGTMSE – Benefit to Bank or not
Page | 18
CGTMSE – Benefit to Bank
Collateral Covered CGTMSE Covered
Loan Amount A 1,00,00,000.00 1,00,00,000.00
Guarantee Coverage@75% B - 75,00,000.00
Collateral value C 1,00,00,000.00 -
CRM Eligible value B - 75,00,000.00
RWA Value (100% Risk Weight) D=A-B 1,00,00,000.00 25,00,000.00
Capital Requirement E 10.88% 10.88%
Capital Required in Amt F=D*E 10,87,500.00 2,71,875.00
Capital saved G - 8,15,625.00
Notional Earnings foregone @17%
H=F*17%
RAROC 1,84,875.00 46,218.75
Net saving in our P/L N - 1,38,656.25
In case of NPA
NPA Balance I 1,00,00,000.00 1,00,00,000.00
Claim from CGTMSE J - 75,00,000.00
Balance on which provision required K=I-J 1,00,00,000.00 25,00,000.00
For substandard 10% provision L=K*10% 10,00,000.00 2,50,000.00
Provision saved M - 7,50,000.00
Note – if any amount recovered, the difference amount will be claimed 75%.
Page | 19
Guarantee Coverage
Category Maximum extent of Guarantee where credit facility is
Above Rs 5 lakh & Above Rs 50 lakh &
Up to Rs 5 lakh
Up to Rs 50 lakh Up to Rs 200 lakh
75% of the amount
85% of the amount in default
in default subject to
Micro Enterprises Subject to a
a maximum of Rs 37.50
Maximum of Rs 4.25 lakh 75% of the amount
lakh
in default subject to
Women entrepreneurs/
Units located in North East 80% of the amount in default subject to a maximum a maximum of Rs
of Rs 40 lakh 150 lakh
Region (incl. Sikkim) (other
than credit facility upto Rs 5
lakh to micro enterprises)
MSE Retail Trade 50% of the amount in default subject to a maximum of Rs 50 lakh.
(up to Rs100 lakh)
All other eligible category of 75% of the amount in default subject to a maximum of Rs 150 lakh.
borrowers
All proposals for sanction of guarantee approvals for credit facilities above ₹50 lakh up to ₹200 lakh will have to be
rated internally by the MLI and should be of investment grade
Page I 20
Annual Guarantee Fee Standard rate- risk based pricing
Revised Standard Rate (SR) 1) Risk premium on NPAs in (2) Risk premium on Claim
Annual Guarantee Fee (AGF) [% p.a.] Guaranteed portfolio Payout Ratio
Women, Micro
Credit Facility Enterprises and
units in North Others NPA Risk Claim Risk
East Region (incl. Percentage Premium Payout Premium
Sikkim) Percentage
Up to ₹5 lakh 1.00
0-5% SR 0-5% SR
Above ₹5 Lakhs and
up to ₹50 Lakhs
1.35 1.50
>5-10% 10% of SR >5-10% 10% of SR
Above ₹50 lakh and >10-15% 15% of SR >10-15% 15% of SR
upto ₹200 lakh
1.80
>15-20% 20% of SR >15-20% 20% of SR
MSE Retail Trade
₹Up to ₹100 lakh
2.00
>20% 25% of SR >20% 25% of SR
11/12/2022
AGF calculation
 In case of term loans, AGF would be calculated on Principal outstanding amount as
on 31st December
 For working capital, AGF would be calculated on Present / Expected Outstanding
 AGF will be charged on the guaranteed amount for the first year and on the
outstanding amount for the remaining tenure of the credit facility
Credit facilities sanctioned before 1st April 2018, AGF will continue to calculate on
limit sanctioned in both the cases i.e. Term Loan & Working Capital. Even Review
with Increase in WC will be calculated on sanction limit.
11/12/2022
Process of Guarantee Application
SME Application CGTMSE Issuance of Annual Expiry of

submitted to MLIs Approval Guarantee Generation of Fee the coverage
 Due Diligence  CGTMSE  After the

done by the MLIs approves the AGF to be paid Annual completion of the
online within 30 days of Guarantee Fee tenure the
 Application application generation of (AGF) is payable guarantee cover
submitted by submitted by demand or first for continuation expires
MLI to MLI, if in disbursement of of the coverage 
CGTMSE for order, Then loan whichever is
guarantee CGPAN and later Risk premium
 Incase of
coverage by end on guarantee
DAN are working capital,
of next quarter fees based on
generated guarantee can be
from sanction NPA levels &
facility wise payout ratios. renewed after
date and expiry
11/12/2022
Now, MLI can apply guarantee coverage anytime during the tenure of the Loan.
Provided
24 in last one year
• The account was not restructured or
• remained in SMA-2 from the date of application
• Eligible only fresh accounts not already registered with CGTMSE.
Provided further that, as on the material date:

(i) Credit facility is standard and regular (not SMA) as per RBI guidelines and / or
(ii)The business or activity of the borrower for which the credit facility was granted has not
ceased; and / or
(iii)The credit facility has not wholly or partly been utilized for adjustment of any debt
deemed bad or doubtful of recovery, without obtaining a prior consent in this regard
from the Trust. 11/12/2022
The cap of ₹200 lakh is the maximum guarantee coverage limit per borrower based on
the outstanding credit facilities and the borrowers can avail incremental credit facilities
(i.e. to the extent of reduction in the outstanding exposure limit)
The information on total exposure of the borrower under CGTMSE and status of the
account (NPA/Standard) are made available to the MLIs at a nominal fee per successful
search for the information displayed in the search facility.
Path: MLI Login>> Reports & MIS>> Search History >> Enter ITPAN number of the
chief promoter of the unit.
Page | 25
• while levying the annual guarantee fee for the first time, the fee is
collected for the full 365 days from the guarantee start date then
next year on pro-rata basis.
• AGF so demanded would be paid by the MLIs on or before 30th
March each year
• In case of pre-closure - Refund of proportionate annual guarantee
fee will be allowed only where closure is marked in CGTMSE
system / refund request is within 3 months from the date of receipt
of fee by CGTMSE.
menu: Guarantee maintenance >> Request for closure
11/12/2022
Revival of closed accounts
If the guaranteed account gets closed due to non-payment of AGF, the guarantee under the
scheme shall not be available and request for revival of accounts/ delayed payment will be
considered subject to the following conditions:
(i) Request for revival of account will have to be submitted within next financial year.
(ii) Account should be standard and regular as on date of submission of request for revival and
the Trust reserves the right to reject the claim if the account turns NPA within 180 days from the
date of revival of account.
(iii) Any fee due by the MLI (current and previous FY) will be demanded along with penal
interest (@ 4% over Bank Rate, per annum) and additional risk premium @15% of standard
rate or at such rates specified by the Trust from time to time, for the period of delay
Page | 27
Responsibilities of lending institution under the scheme
• evaluate credit applications by using prudent banking judgement, use their business discretion / due
diligence
• closely monitor the borrower account
• safeguard the primary securities
• that the guarantee claim is lodged within such time as may be specified by the Trust
• maintain its recourse and initiate such necessary actions for recovery of the outstanding amount
even after claim is received
• should intimate the Trust while entering into any compromise or arrangement, which may have effect
of discharge or waiver of personal guarantee(s) or security
• the right to list the defaulted borrowers’ names and particulars on the Website of the Trust
Page | 28
Claim Process
Remittance of 2nd Claim
Online Claim 1st Claim Payment of 1st
NPA marking recovery installment
installment installment
Lodgment
1st installment  Any recovery  2nd

 Guarantee
On approval
of claim is settled received post installment of
 NPA to be marked can be invoked of claim
if claim settlement of 1st claim is settled
in CGTMSE portal only after application
application is claim, is to be on conclusion
by end of next initiation of 1st
legal action found to be in remitted to of recovery
quarter from NPA installment
order CGTMSE (net proceedings
date (75% of
Claim off legal
eligibility) is
application can  If for any expenses)
On up-gradation be lodged with
paid through
or restructuring 3/1/2 years
queries, claim NEFT/RTGS
MLI can update from the NPA application is
the unit in date/lock in returned for
CGTMSE portal period based on resubmission
sanction
date/NPA date 11/12/2022
Invocation of Guarantee
• To inform the date of NPA in a particular calendar quarter, by end of subsequent quarter.
(Member Login area >> Guarantee Maintenance >> Periodic Information >> NPA Details)
If NPA date is on or after 15.03.2018, The lending institution may invoke the guarantee in respect of credit facility
within a maximum period of 3 years from the NPA date or lock in period whichever is later.
For NPAs prior to 15/03/2018 and after 01/01/2013, time period for claim lodgement will be 2 years and
prior to 01/01/2013, the time period for claim will be 1 year.
The lock-in period of 18 months from either the date of last disbursement of the loan to the borrower or the
guarantee start date, whichever is later, has lapsed.
must initiate legal procedure against the borrower for recovery like SARFAESI, DRT, LOK Adalat, etc.
Waiver of legal action up to outstanding of Rs.1,00,000/-
The Trust shall pay 75 per cent within 30 days, if claim in order and filled up in the revised format
11/12/2022
the amount realized, if any, from the sale of such assets or otherwise shall first be credited in full by the lending
institutions to the Trust before it claims the remaining 25 per cent of the guaranteed amount.
31
Balance 25 per cent of the guaranteed amount will be paid on conclusion of recovery proceedings by the lending
institution or after three years of obtention of decree of recovery, whichever is earlier.
Settlement of second / final instalment or conclusion of recovery - In following scenario
• whatever assets available were sold off under SARFAESI and amount is remitted to the Trust.
• The borrower is not traceable
• Net-worth of the Personal Guarantor is not worth pursuing further legal course.
• No other assets are available
• Legal action is taken under RRA, Civil Court, Lok Adalat or DRT where there is no further means to
recover the money from the borrower
• The borrower is absconding
• No assets are available and the borrower is absconding. It may not be worth pursuing legal action.
11/12/2022
The lending institution shall be liable to refund the claim released by the Trust together with penal interest at the
rate of 4% above the prevailing Bank Rate, in the event of
• Serious deficiencies or
• where lodgement of the claim was more than once or
• where there existed suppression of any material information for the settlement of claims.
• The lending institution shall pay such penal interest from the date of the initial release of the claim by the
Trust to the date of refund of the claim.
In case of multiple accounts where recovery has been made after receipt of claims from the borrower. The recovery
will be first adjusted in CGTMSE Account only.
Interest shall be payable at 4% above Bank Rate, if recovery amount is not remitted to Trust within 30 days.
11/12/2022
One time settlement
In case of OTS:
Following document to be submitted while claiming for 2nd instalment after conclusion of
recovery proceedings by way of OTS:
1. Complete OTS memorandum duly approved by the competent authority along with the
minutes.
2. Account Statement (after NPA date)
3. Bifurcation of the legal expenses deducted
4. legal action must be initiated by the MLI even in the event of OTS.
Page | 33
Is service fee payable even after lodgement of claim?
Yes, Annual Service Fee/AGF is required to pay after lodgement of claim till settlement of first instalment of 75% of the
guaranteed amount.
AGF will be charged on the outstanding loan amount. What will the AGF charges where there has been no
disbursement (TL) or no utilization (WC) in the guaranteed account.
In case of Working Capital, Expected Maximum Outstanding may be updated for calculation of fee amount and in case of
undisbursed / partially disbursed Term Loan, fee shall be generated on Guarantee amount.
Whether the interest on term loan and other charges can also be guaranteed by the Trust?
i. Term Loan: - Defaulted amount (inclusive of 1 Quarter interest)

ii. Working capital facility: - Outstanding working capital advance (inclusive of interest up to the date
of NPA).
iii. Other charges such as penal interest, commitment charge, service charge or any other levies /
expenses shall not qualify for the guarantee cover. 11/12/2022
Whether the credit facility for rehabilitation / nursing of the sick unit can also be eligible for guarantee
under the Scheme?
If Unit becomes sick due to factors external reason, the assistance / credit for rehabilitation extended by the
lender could also be covered subject to cap of 200 lakh.
Under what circumstances the guarantee cover obtained by the lender in respect of particular borrower
will lapse?
If the lender has advanced second / subsequent credit facility to the borrower and extended the scope of
collateral / third party guarantee to the existing credit facility for which guarantee cover has been obtained from
the Trust
Issue of notice under Lok Adalat is sufficient for invoking the guarantee and getting the first
installment?
Yes, for the purpose of the scheme, issue of notice under Lok Adalat is sufficient to prove the legal proceedings
have initiated.
Who will bear the legal expenses of recovery, MLIs or borrower or CGTMSE?
Initially, the legal expenses will be borne by the MLI. At the time of remittance of recovery proceeds to CGTMSE by the MLI,
same may be deducted. 11/12/2022
Common Reasons
Common Reasons forfor Return/
Return/ Rejection
Rejection of claims
of claims
1. Repayment and/or Recovery amount given is incorrect
2. Possession date as per SARFAESI Act sec 13(4) not taken. Simply issuing notice under sec
13(2) is not sufficient.
3. Interest rate charged is not within the prescribed norms of CGTMSE.
4. Legal details not provided in the claim form.
5. Legal details given in the claim form does not match with the details in the legal
documents.
6. Valid legal document not attached. Legal document should be upload duly stamped and
signed by the legal authority / Bank. Entire legal document should be uploaded in the claim
form.
7. Primary security value not given at the time of sanction date/NPA date/claim lodgement
date
Page | 36
Common Reasons for Return/ Rejection of claims
8. Repayment amount given is NIL / very less as compared to the time between the sanction
date and NPA date
9. Reason for account turning NPA is wilful defaulter/misappropriation or diversion of funds
(not mentioned)
10. In case of waiver of legal action executive committee letter confirming waiver of legal
action duly signed by the competent authority (General Manager) is not attached.
11. Internal rating required for cases above Rs.50 lakhs.
12. Legal action is before NPA
13. Legal action initiated just after the repayment due date
14. Legal action not initiated
15. Case was overdue or doubtful of recovery as on guarantee start date
Page | 37
Page
| 38
11/12/2022
For any query or help
you may send email to support@cgtmse.in and gf@cgtmse.in for any technical
support
Page | 39
Thank You
Page | 40

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Credit Guarantee Fund Trust

for Micro and Small

Udyam Registration Certificate on https://udyamregistration.gov.in portal is mandatory

PAN No. is not required up to Rs.5.00 lacs limit

 Retail trade sector covered up to Rs.100 lacs.

What is Primary & Collateral Securities ?

Third Party Guarantee.

Tenure of the guarantee coverage.

Partial / Hybrid security coverage

What will be the Guarantee Limit ?

Collateral value: 1 Crore

What will be the Guarantee Limit ?

Collateral value: 1 Crore

What will be the Guarantee Limit ?

What will be the Guarantee Limit ?

What will be the Guarantee Limit ?

Collateral value: 1 Crore

What will be the Guarantee Limit ?

Collateral value: 1 Crore

Term Loan Sanctioned: 5 Crores

Term Loan Sanctioned: 5 Crores

Claim Limit: Maximum Limit would be on which fee is paid = 1 Crore

Term Loan Sanctioned: 5 Crores

Term Loan Sanctioned: 5 Crores

 For working capital, AGF would be calculated on Present / Expected Outstanding

SME Application CGTMSE Issuance of Annual Expiry of

 Due Diligence  CGTMSE  After the

Provided further that, as on the material date:

• closely monitor the borrower account

• safeguard the primary securities

1st installment  Any recovery  2nd

Waiver of legal action up to outstanding of Rs.1,00,000/-

Settlement of second / final instalment or conclusion of recovery - In following scenario

2. Account Statement (after NPA date)

3. Bifurcation of the legal expenses deducted

i. Term Loan: - Defaulted amount (inclusive of 1 Quarter interest)

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