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CS Professional · Banking and Insurance - Laws and Practice · Various Government Schemes

Sunrise Textiles, a new micro manufacturing unit in Surat, needs a collateral-free term loan of Rs 40 lakh from a bank. The promoter asks which government-backed arrangement lets the lender cover the credit risk without taking collateral or a third-party guarantee from the borrower. Which arrangement fits best?

CGTMSE cover fits best. It gives lenders a guarantee for collateral-free, third-party-guarantee-free credit to micro and small enterprises, so a bank can lend to Sunrise Textiles without security. Kisan Credit Card, Jan Dhan overdraft and Atal Pension Yojana serve other purposes.

  1. ACredit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) coverCorrect
  2. BKisan Credit Card limit
  3. CPradhan Mantri Jan Dhan overdraft
  4. DAtal Pension Yojana subscription

Explanation

CGTMSE provides a credit guarantee to lenders for collateral-free and third-party-guarantee-free loans to micro and small enterprises. The other options are a farm credit card, a basic account overdraft facility and a pension scheme, none of which guarantee MSE term loans.

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