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Fees and Interest rate charged under CGTMSE Scheme
Being a scheme which is implemented by Member Lending Institutions (MLIs) on behalf of the government, there are certain fees and charges associated with it. One can classify the fees into two major categories, a Guarantee Fee and an Annual Service Fee.
Guarantee fee :
Each MLI is expected to pay a guarantee fee to the trust, with this amount depending on the quantum of credit provided. MLIs are expected to pay this fee within a period of 30 days from disbursement of credit. The table below highlights the guarantee fee applicable in different cases.
Annual service fee :
Each MLI is expected to pay an annual service fee in order to validate the guarantee cover offered under CGTMSE. This fee should be paid before June 1st every year. The table below highlights the annual service fee applicable in different cases.
Interest rate :
Lending institutions can charge an interest rate as their discretion, subject to the condition that this rate falls under RBI guidelines. This interest rate depends on the Prime Lending Rate (PLR) of an institute, with it not exceeding the PLR by over 3%.
Almost every financial institution is comfortable in providing loans against collaterals. This is because of the fear of NPA and ambiguity of financial decisions made by first-time entrepreneurs. This is why a major precondition of CGTMSE states that the company should not have a loan secured by collateral or a third party or both. Also, it is better for entrepreneurs to have a clean financial history along with a healthy financial status. Additionally, entrepreneurs need to prepare a project report that clearly indicates the viability of their project. This should also be easily understandable for lending institutions.