SIDBI’s CGTMSE offers banks ‘provisional guarantee’ to lend to MSEs; aims to fast-track loan requests

The government had announced in May this year that it would provide Rs 4,000 crore to CGTMSE to offer partial credit guarantee support to banks.

Credit and Finance for MSMEs: The credit guarantee fund trust for micro and small enterprises (CGTMSE), which operates credit guarantee scheme for MSEs, is looking to enhance impetus towards credit availability for small businesses. The trust, which was set-up by the government and SIDBI, has launched an online portal called Udaan for MSEs to get provisional guarantee certificate to avail collateral-free loans from SIDBI’s member lending institutions (MLIs) including banks and non-banking financial companies. Currently, 35 MLIs have been onboarded on the portal even as there is no upfront fee or payment for these MLIs to list themselves on Udaan.

MSEs would be able to check their “sustainability for guarantee-based loan products” from MLIs on the portal while CGTMSE will help in “selection of eligible borrowers”, SIDBI Chairman and MD Mohammad Mustafa said in a video conference on Tuesday. The eligible MSEs could then approach MLIs of their choice for securing credit with the provisional guarantee. Mustafa said that this (approach) could be a game-changer much like in countries like Korea, Malaysia, the US etc., even as he urged MLIs to popularise the portal by enhancing support to entrepreneurs.

“It is an enabler as ultimately the credit has to be given by the SIDBI’s MLIs. What was happening so far was that many a times banks weren’t sure that after giving the loan to MSEs they would be able to secure a guarantee for that. So that was a big handicap and it sometimes was also an excuse for them to not lend. This initiative will ensure that a provisional guarantee certificate is issued so that banks are sure about the guarantee,” Sandeep Varma, CEO, CGTMSE told Financial Express Online.

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The collation of data for credit decision by banks and NBFCs will majorly be done through the portal and sent to the lenders for faster turn-around time and quick sanctions. Also, “MLIs are provided with an option to create multiple products, in accordance with their internal credit policies,” the trust said in a statement. The portal would automatically match these products with filtered loan requests at the back-end and provide banks with these requests.

MSEs would have to log in to file requests following which they would be required to submit consent-based details. MSEs would then be provided with the provisional guarantee certificate as per their eligibility. MLIs, onboard Udaan, would accordingly then undertake the due-diligence process for the loan application before sanctioning the amount.

The launch of the Udaan portal comes amid the government’s scheme of offering Rs 20,000 crore in subordinate debt to stressed MSMEs or those that are NPAs. The government had announced in May this year that Rs 4,000 crore will be provided to CGTMSE for it to provide partial credit guarantee support to banks. 2 lakh MSMEs are likely to benefit through this scheme.

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