The Ministry of MSME, Government of India and SIDBI provides the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) with an object to facilitate flow of credit without the need for collaterals/ third party guarantees to the MSE sector. The purpose of this scheme that the lender should give importance to project viability and secure the credit facility purely on the primary security of the assets financed. The Credit Guarantee scheme (CGS) assures the lender that, in the event of an MSE unit, which availed collateral- free credit facilities, fails to discharge its liabilities towards lender, the Guarantee Trust would make good the loss incurred by the lender up to 85 % of the outstanding amount in default.

According to RBI circular, banks are mandated not to accept collateral security in the case of loans upto Rs 10 lakh extended to units in the MSE sector. Banks may on the basis of good track record and financial position of MSE units, increase the limit of dispensation of collateral requirement for loans up to Rs.25 lakh with the approval of the appropriate authority.

For MSME Registration any entrepreneur having valid Aadhaar Number can apply Online.

Cluster based approach to lending is intended to provide a full-service approach to cater to the diverse needs of the MSE sector which may be achieved through extending banking services to recognized MSE clusters. A cluster based approach may be more beneficial o (a)in dealing with well-defined and recognized groups o (b) availability of appropriate information for risk assessment o (c) monitoring by the lending institutions and o (d) reduction in costs. The banks have been advised to treat it as a thrust area and increasingly adopt a similar for SME financing. United Nations Industrial Development Organisation (UNIDO) has identified 388 clusters and covers 21 states in various parts of the country. The Ministry of Micro, Small and Medium Enterprises has also approved various cluster’s list under the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) and Micro and Small Enterprises Cluster Development Programme (MSE-CDP) available in 121 Minority Concentration Districts. Accordingly, banks have been advised to take appropriate measures to improve the credit flow to the identified clusters.

For issuance of MSME Certificate Aadhaar Number is mandatory.