Credit Enhancement Guarantee Scheme For The Scheduled Castes

Credit Enhancement Guarantee Scheme for Scheduled Castes

The Credit Enhancement Guarantee Scheme for Scheduled Castes (SC) is a pivotal initiative launched by the Ministry of Social Justice and Empowerment. This scheme aims to foster entrepreneurship among SC individuals by providing financial backing through guarantees on loans, thereby promoting innovation and technological growth.

Overview of the Scheme

This scheme endeavors to enhance the entrepreneurial spirit within the Scheduled Caste community by supporting Member Lending Institutions (MLIs) through a Credit Enhancement Guarantee. This guarantee covers amounts ranging from a minimum of Rs. 0.15 crore to a maximum of Rs. 5.00 crore. It specifically targets Working Capital Loans, Term Loans, or Composite Term Loans offered by MLIs to SC entrepreneurs.

Objectives of the Scheme

The primary objectives of this initiative include:

• Encouraging innovation and growth technologies among Scheduled Caste entrepreneurs.
• Promoting financial inclusion within the SC community.
• Facilitating economic development tailored to the needs of SC entrepreneurs.
• Generating direct and indirect employment opportunities for the SC population across India.

Eligible Sectors

Financial assistance under this scheme is available for borrowers engaged in:

• Primary sector
• Service sector
• Manufacturing sector

Types of Eligible Borrowers

To qualify for this scheme, the following borrower categories are recognized:

• Registered companies or partnership firms with over 51% shareholding by SC promoters for at least six months.
• Societies registered under the Society Act that also maintain over 51% shareholding by SC members for a minimum of six months.
• Sole proprietorship firms or individual SC entrepreneurs.

Preference is granted to SC promoters of companies over registered partnership firms and societies. Additionally, SC promoters are required to maintain their shareholding throughout the loan’s duration.

Lock-in Period

The guarantee provided under this scheme will have a lock-in period of 12 months commencing from the date of the last disbursement. Claims made under the guarantee will not be processed if the account becomes non-performing within this lock-in duration.

Loan Specifications

The term “loan” refers to either Working Capital Loans or Term Loans/Composite Term Loans provided to SC enterprises by MLIs.

Guarantee Fees and Responsibilities of IFCI

The Government of India (GoI) will pay an upfront fee of 1.5% (exclusive of taxes) for the creation of the initial corpus of Rs. 200 crore. Following this, an annual maintenance fee of 0.50% (exclusive of taxes) will be charged by IFCI based on the total outstanding guarantee amount as of March 31 each year. The upfront fee will be deducted from the Non-Lapsable Account (NLA) as soon as the scheme starts, while the annual maintenance fee will be deducted every year on April 1.

Member Lending Institutions will incur a guarantee fee per the established structure, which will be applicable for the first year and subsequently renewed at the start of each financial year. In case of non-payment of the renewal fee by May 31, the guarantee will not apply unless agreed upon by IFCI, which may also involve a penalty interest charge.

Benefits Available

Key benefits of the scheme include:

• Guarantee coverage ranging from Rs. 0.15 crore to Rs. 5.00 crore.
• Individual SC entrepreneurs can qualify for guarantees on loans up to Rs. 1.00 crore.
• The maximum tenure for the guarantee is seven years or up to the loan repayment period, whichever comes first. Initially, the loan is guaranteed for one year, with annual renewals subject to fees and satisfactory loan conduct.

Repeat Credit Enhancement

Entrepreneurs with a proven track record can avail of repeat financing under this scheme after the liquidation of the initial facility. This is intended to foster a healthy credit culture among SC entrepreneurs.

Eligibility Criteria

The following criteria must be met for eligibility:

• Enterprises, projects, or units established, promoted, and managed by Scheduled Castes in primary, manufacturing, and services sectors that create assets using the funds from government subsidy/grant schemes.
• Registered companies, societies, or partnership firms with over 51% shareholding by SC entrepreneurs, maintaining management control for a minimum of six months.
• Credit guarantees are available for startup SC entrepreneurs as well.
• Documentary proof of SC status is mandatory for all applicants at the proposal submission stage.

Application Process

To apply for the Credit Enhancement Guarantee Scheme, follow these steps:

1. Visit the official application portal.
2. Complete the enterprise details and other required fields.
3. Fill in the borrower information along with necessary details.
4. Provide loan and bank information along with other mandatory fields.
5. Save and upload all required documentation.
6. Submit the application.