Ultimately, the entrepreneur cannot come to you directly. He has to come through the bank?
We have no relationship with the entrepreneur. We have relationships with the bankers.

How can the entrepreneur make the bank move his case to you?
One is the awareness. If you are not aware, you cannot ask for it. Second, the banker also should be aware. It is not only that the client is aware but the bank is not aware. If both are aware, then I think there is a lot of positivity and synergy. Our experience shows that wherever clients and bankers are aware, coverage has been higher.

Any geographical patterns?
Tamil Nadu and Kerala. Tamil Nadu is the highest in terms of numbers and Kerala is number two. If you look at Kerala’s example, today you cannot call it one of the most economically developed states, but the coverage of our guarantee scheme has been quite good. That shows that if you have a very knowledgeable banker and a well-informed public, the marriage can be good.

Let me come back to the guarantee part specifically, is it an overall guarantee for the entrepreneur or is it the guarantee for the project? I, as an entrepreneur, could have multiple projects under guarantee?
The scheme says upto Rs 50 lakh per borrower. There could be multiple projects covered.

Suppose, you take a loan for Rs 10 lakh; subsequently, you want to expand, you can take another Rs 10 lakh and so on till 50 lakh without collaterals.

As an entrepreneur, can I demand the bank to move it to you?
I think we need to move to that position, where every individual as a matter right should be able to ask for that. Ultimately, the banker decides. He can always say this is not a viable proposal and you will have a tough time explaining to him that it is a viable proposal.

What can an entrepreneur do to move his case to you?
One he needs to be sure of what he is getting into. He needs to have a very proper assessment of his own project. He needs to be able to convince the banker that is worth investing. Then when it comes to collaterals, he can always mention our scheme.

Typically when a bank comes to you after appraising a project do you do a repeat appraisal?
Here in India, we have chosen a model where we trust completely on the banker’s ability to assess the project. We don’t question them.

How much time does it take for you to process an application?
It takes 24 hours or less.

What is your default rate?
Default rate is negligible. Our total guarantees as on date must be around Rs 3,300 crore, and we would have paid out around Rs 11 crore. There is not a single case pending with us for pay out. That is also a 24-hour turnaround. The bank makes a claim today and tomorrow morning, the cheque is out.

They do the due diligence and they get to you?
There is no due diligence. If something goes wrong, they have to file the claim with us. While filing the claim, there are five or six columns they have to tick. One is whether the guarantee is valid. Whether they have classified the specific loan as an NPA (non performing asset) in their books, Third is if they have classified it as an NPA, have they issued a recall notice, fourth is whether they have filed in the appropriate forum, and fifth whether there is a certification from an AGM level officer. If these things are there, we simply issue a cheque. There is nothing more we need to know. Once that has been done, there is no value addition from our side.

We pay 75 % of the guaranteed amount immediately. The remaining 25% we pay after the total process is over. After the decree is obtained. Ultimately we share the default 3:1.

Is that why the banks are holding back because they have to bear 25%?
You cannot have a situation where you have a 100% guarantee scheme. If you see internationally also, guarantees have been ranging between 50-80%. There is a case where they have done 100%, once I think, but they found the default rate rising dramatically.

We need to be somewhere where it interests the banks to get covered, but at the same time it cant be 100% in their favor. 75% to 80% is the global practice.

What is the biggest challenge going ahead?
One is that we need to scale up in a big way. That is the biggest challenge. Second is that more than actually covering the number of loans, personally I feel, that CGTMSE should be in a position to encourage the banks to lend at a lower rate. If that happens then I think the guarantee mechanism can work well because it removes a lot of apprehensions of the banker should come down for the SMEs. When that happens the take off stage would be ready.

Comments (17)

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Not interested Money Lender Institutions but still your Member?
written by Subodh S. Ingle, June 25, 2010

Dear Sir
I am young entrepreneur wanted to start own food processing unit under CGTSME Scheme. for that required every ting I had fulfill and submitted the proposal financial institution members, firstly they don't have any idea or knowledge about this scheme when all the information submitted by me after that they are not ready to take proposal just because of I am applying with your CGTMSE Scheme. They gives me a advice submitted proposal is very viable and strong do one thing just arrange colletral we are ready to give you working capital on that basis . But they are not ready to accept the said proposal under CGTMSE.I am very disappointed. I would like to inform you that this CGTSME Scheme not applicable by your lending members then why they are still your members? If any person wants to start there project with support of your scheme is there any fault of that entrepreneur. I have not any way to start that project I am very much depend on your scheme. Please do some thing for me so I can develop my project with your support.
Subodh S. Ingle
Director,
Three Leaf Foods Pvt.Ltd
Aurangabad( Maharashtra)

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samples project proposal and project report
written by Darshan Patel, June 11, 2010

we are young Industrial automation product development firm . out products are hitech and new to indian industry . i.e. Machine vision ,image processing .

We need proper guidance for project report . you should publish some sample project reports so that people can prepare case for your loans .

As small firms can not afford to hire professionals to wire project report for the same

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Start-Up Funding Required for Infrastructure Developments
written by MANISH KUMAR, April 04, 2010

I m 1st generation entrepreneur,working on unique infrastructure plan for small towns and big villages. Is CGTMSE provide funding for these sectors and any other institution who works on same.

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Start-Up Funding Required for Product Based Accounting Softwares
written by Mr. Supriya Dutta, February 03, 2010

Dear Sir,
I’m a marketing professional and is looking for product based software development funding. There are 4 members in my team consisting of my childhood friend who is an aspirant Chartered Accountant, two software developers and myself an M.B.A and having 4 years of Sales & Operations Experience in Telecom and Financial Industry respectively in the profile of Channel Management and Relationship Management. We’re seeking funding for accounting based software development and setting up PAN India Distributor set-up for the same. Please contact me in case if you find this proposal interesting and lucrative.

Warm Regards,
Mr. Supriya Dutta,
Kolkata, India,
(M) +919874545880,
E-Mail:- This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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MANAGING DIRECTOR
written by Ram Singh, July 23, 2009

Looking forward to availing this scheme

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...
written by Rajesh Jakhotya, June 11, 2009

what are the rates and charges for availing of this facility?

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...
written by Rajesh Jakhotya, June 11, 2009

What are the charges for availing this schemes? further who has to bear the charges whether banks or the borrower? if Borrower then the ultimate lending cost will increase for the sme borrower? isnt it? please clarify

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Proprietor
written by Venkatesh Murthy, May 31, 2009

I'm a first generation enterprenuer having been in bussiness for the last 3 years & have achieved a sizeable turnover of 30L during the last year.
Although CGTMSE has issued clear guide lines on the elgibility criteria, the lending institution is holding up processing the project proposals sighting reasons as technical issues.If the borrower has a home loan with an other bank which was taken earlier to the date of setting up of bussiness still active / clean standard account & the same is being treated as technical issue ( Multi banking )
It would be fair not to link home loans to bussiness credits.
What are the options for the borrower to avail working capital under CGTSME scheme.

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a boost to entrepreneurs
written by Suresh Sevelar, April 17, 2009

Thanks for sharing the availiabiklity of such trusts that can help first generation entrepreneurs in particular like me.I am considering into venturing a new business and was concerned on the bank collaterals and now have the knowledge of CGFTSME.
Thanks for the info.
Suresh

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CMD
written by Dr. Madhu Gupta, February 10, 2009

We find all schemes are good & helpful if implementation is proper and knowledge about the schemes. please think about those industries came under npa and sick revival will give a new path to meltdown

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Seek help for CGTMSE
written by Saikat Das, January 05, 2009

I have approched many banks in Kolkata for CGTMSE. Everybody said Software company is not eligable for this scheme. What I have found that maximum bank managers here are not aware of this scheme. As there is no office of CGTMSE I am helpless when bank refused me to say there is no help to grow my small business which in 1 st year with my own money I made it a 26L turnover company. Any body here to help me??

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Re: Bank does not know about this
written by Krishna Kumar, December 11, 2008

Hi Syed, Mathews

One of the problems that the scheme faces is that many bankers themselves are not aware of this facility or the fact that their bank is a member of the scheme.

The full scheme is available at http://cgtmse.in/jsp/HomePage/CGTSIScheme.htm.

You could bring it to the attention of your bank manager

The eligibility criteria is available at http://cgtmse.in/jsp/HomePage/...aFrame.htm

Also see FAQ at http://cgtmse.in/jsp/HomePage/faq_finalFrame.htm

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CGFTMSE
written by Mathews.T.A., December 11, 2008

I have never heard of such a facility offered by Govt of India either through news bulletings or any media. Now let me know as to how I can avail of this facility to take credit without collateral. Whom should I approach. Is there any website giving details of the procedure ?

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CGTMSE
written by Mathews.T.A., December 11, 2008

Read the interview but I never heard of such things either through news bulletins on any media. I think even most of the banks in India are also not aware of such a credit facility. Now I would like to know as to HOW I CAN AVAIL A CREDIT FACILITY WITHOUT COLLATERAL. I am an exporter of light eigineering products. Please HELP.

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Good insight even to the bankers.
written by Budh Parkash, November 27, 2008

The article / interview gives a good insight even to a banker about the whole philosophy of guaranttee mechanism. Increased awareness at all levels will increase the coverage in times to come as 95% of units is yet to be linked to the institutional credit in India.

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CGTMSE - unfamilier with the
written by Syed, November 18, 2008

Dear Sir,
Thanks for posting this valuable information from CGTMSE, it is really helpful for all first-generation entrepreneurs, who do not have proper source to raise the money. After reading information about CGTMSE, we have approached an Indian Overseas Bank's bank manager, who claimed that he doesn't know anything about such scheme by CGTMSE.

Is there any specific bank, that we should approach?

Thanks
Syed
1RupeeMatrimony.com

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economic empowerment / development of women groups
written by P.RATHAKRISHNAN, September 22, 2008

we, do service to the poor people in our target area by means of organising self help groups among women. so far we have formed more than 400 SHGs. each group has been link with bank and getting Revolving Funds. and repaying 100%. they are seeking more economic assistance for their independent development. hence, we seek financial assistance on micro credit from your end. and requesting the possibilities.

thanking you,

yours truly
P.RATHAKRISHNAN
EXECUTIVE SECRETARY - EARTH TRUST.

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