The micro and small enterprises sector will have easier access to credit if recommendations of the Working Group set by the Reserve Bank of India are implemented. The committee has recommended increasing the limit for collateral free loans to the MSE sector from Rs 5 lakh to Rs 10 lakh.
The guarantee fee for collateral free loans upto Rs 10 lakh to Micro Enterprises should be borne by the Credit Guarantee Fund Trust for Micro and Small Enterprices (CGTMSE), said the report. However, the CGTMSE should be allowed to adjust the guarantee fee both downwards and upwards based on the modelling of the dynamically evolving distribution of claims. This will ensure that the CGTMSE remains self-financing and self-sustaining in the long-term, said the report.
The CGTMSE may charge composite, all-in guarantee fee of 1 per cent and lower fees from women entrepreneurs, micro enterprises and units located in North-Eastern Region including Sikkim. The report has suggested exempting the CGTMSE from Income Tax on both guarantee fee and the income on investments, as it is a non-profit organisation.
With a view to simplifying the procedure for filing claims in respect of small loan accounts, initiation of legal proceedings as a pre-condition for invoking of guarantees should be waived for credit facilities up to Rs 50,000, said the report.
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