KredX Blog KredX Blog
  • HOME
  • PRODUCTS
    logo

    FOR BUSINESS logo

    logo

    FOR INVESTORS logo

    Invoice Discounting

    Unlock money tied up in unpaid invoices

    KNOW MORE

    KredX Pay Later

    A closed loop financing for your dealers/distributors/Retailers

    KNOW MORE

    KredX Cash Management Solutions (CMS)

    Get real-time analytics. Manage disputes. Minimise risks. Get risk-free returns

    KNOW MORE

    KredX Global Trade

    Get Quick Finance To Fund Your Import-Export Requirements

    KNOW MORE

    Invoice Discounting

    Diversify your portfolio with alternative short-term investments

    KNOW MORE
  • PARTNER WITH US

    Business Partner Program

    Accelerate your client’s business growth and get attractive payouts on time

    KNOW MORE

    Financial Advisor Program

    Grow your credibility and clients’ investment portfolio

    KNOW MORE
  • KNOWLEDGE CENTER

    FAQs

    Blog

    Knowledge Base

    Webinars

    Reports

    WhitePapers

    Podcasts

  • COMPANY
  • LOGIN / SIGNUP
  1. Home
  2. Business
  3. Has The Credit Guarantee Scheme Really Helped The SME Industry?
 Has The Credit Guarantee Scheme Really Helped The SME Industry?
Business MSME

Has The Credit Guarantee Scheme Really Helped The SME Industry?

by KredX Editorial Team September 11, 2018 0 Comment

The improving SME landscape in India is a testament to the efforts of the government through the years. In the past, applying for funding or availing loans for SME’s was no easy task. The decline of the industry served as a wake-up call to the government. To help with this issue, the Government of India and the Small Industries Development Bank of India (SIDBI) set up the Credit Guarantee Fund Trust for Small and Micro Enterprises (CGTMSE) in August 2000 under the Credit Guarantee Scheme (CGS). The CGTMSE was introduced with an intention to allay all issues surrounding loans and funding within the small, micro and medium enterprises segment. The scheme sent out directives to banks wherein they were required to sanction loans of up to Rs.1 Crore without collateral or third party guarantee to SME’s.

While the introduction of the scheme brought about some much-needed changes within the sector, there were still a number of shortfalls. This was primarily due to a low demand of goods produced by the SME industry and cash crunch. The cash crunch was set off because of the ineffective implementation of the Credit Guarantee Scheme. Banks would often chase the bigger entrepreneurs as the smaller businesses needed smaller loans and this incurred high transaction costs for credit origination and follow up to the banks. As a result of this, the smaller businesses began getting sidelined and had nowhere to go to take a loan.

To address this very issue, Prime Minister Narendra Modi recently in December 2016, announced the enhancement of the Credit Guarantee Scheme credit limit from Rs.1 Crore to Rs.2 Crores. This announcement also included a loan extension to cover not just banks but non-banking finance companies (NBFC’s) as well.

As expected, the SME sector has welcomed this reform with arms wide open owing to the higher credit limit and working capital. This announcement also includes an increase in the maximum permissible bank finance (MPBF) of working capital from 20% to 25%. However, the majority of the small business owners feel that the lending rates are still on the higher side ranging between 18% to 19% typically and would need to be decreased to truly aid the rapid growth of the MSE industry.

This enhancement in the credit limit is expected to bring a rise in the number of new and existing SME’s approaching banks and NBFC’s for monetary help. While the reforms are a move in the right direction, it becomes vital that strict action is taken against those financial entities that deviate from government directives without which any scheme targeted at the SME industry become a sheer waste of time and money.

If your Business is looking for alternative Finance options, you can get your unpaid Invoices Discounted via KredX here.

Share This:
Previous post
Next post

KredX Editorial Team (Website)

administrator

Leave a Reply Cancel reply

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

Enquire now

  • Invalid value

  • Invalid value

  • Invalid value

The Best Of Alternative Investments, Now On Your Phone

Download App:

KredX Blog KredX Blog

Wing ‘A’, Ground Floor, Office-1 Block-‘A’, Salarpuria Softzone, Bellandur Village, Varthur Hobli, Bangalore South Taluk, Outer Ring Road, Bangalore – 560103

+1 212-602-9641

info@example.com

Get More Location

Follow us:

Download app:

Company

Home
About Us
Careers
Contact Us
Our Offices

Resources

Blog
Reports
Whitepapers
Knowledge Base
Podcasts
Webinars

Support

FAQs
Talk To Our Advisor
Chat With Us
Sign Up
Login

Legal

Nodal Officer Name: Amrutha A / Ph: 08061799200, IVR-9 / Email: Amrutha@Kredx.Com
Terms And Conditions
Privacy Policy

Investor Products

Invoice Discounting
Bonds
Digital Gold/Silver
KredX Assured

Business Products

Invoice Discounting
Buy Now Pay Later
KredX Cash Management Solutions
KredX Global Trade

Quick Links

Business Partner Program
Financial Advisor Program
Business Suite
©2022 Minions Ventures Pvt Ltd