Credit Enhancement Guarantee Scheme for the Scheduled Castes

Credit Enhancement Guarantee Scheme for the Scheduled Castes was announced on July 18, 2014, for which a sum of Rs. 200 crore has been allocated. The scheme supports young and start-up entrepreneurs who are from scheduled castes. The budget of the scheme is allocated under social sector initiatives to reach out to the entrepreneurs among the scheduled castes who are supported by Banks and Financial Institutions in the form of Credit Enhancement Guarantee.

Objective of the Scheme

The scheme is an initiative that is implemented throughout the nation to enhance entrepreneurship among the Scheduled Caste who are motivated for innovation and growth of the technologies.
To promote the financial inclusion of SC entrepreneurs and motivate them towards further growth of SC communities.
To facilitate economic development of SC entrepreneurs.
To develop direct and indirect employment generation for the SC population in India.

Features of the Scheme

Sponsoring Agency: Department of Social Justice and Empowerment, Ministry of Social Justice and Empowerment (MS&JE), Government of India. Size of Scheme: Initial Capital allocation of Rs. 200 Crore is provided, and this amount would be enhanced by the Government every year with similar or higher allocation amount through the annual budgetary allocation, based on the progress, response and effectiveness of the scheme. Structure of the Scheme: The Indian Government has set aside a sum of Rs. 200 crore with IFCI Ltd that would be kept in a separate No Lien Account (NLA). Credit Enhancement Guarantee will be extended out of this fund and to the extent of the fund/ available balance in the NLA, to Member Lending Institutions to extend the Working Capital Loans, Composite Terms Loans or Term Loans to SC entrepreneurs. The funds are used to offer Guarantees to the ML who will be encouraged to finance SC entrepreneurs at reasonable rates so that the enterprises profit from the venture and be contributors of the capital formation in the country. Duration of the Fund: Within seven years from the date of implementation with provision to review and extend the scheme for further seven years from each corpus set update, based on the expected deliverables from the scheme. This process would be reviewed annually by MSJ&E depending on the MIS received from IFCI from time to time. Closing under the Fund: The scheme is an open-ended scheme that is applicable on first come first served basis for Member Lending Institutions (MLIs) till the availability of corpus with IFCI parked in No Lein Account by GOI. Guarantee Period: One year that can be renewed at the expiry of each year for the entire loan period with a maximum tenure of seven years.

Eligibility Criteria

Enterprises, projects/units that are set up, promoted and run by Scheduled Castes in primary, manufacturing and services sector ensuring asset creation from the funds that are deployed in the unit under any State/ Central Government subsidy/ Grant scheme.
Registered Companies and societies/ sole proprietorship firms/ registered partnership firms which provides 51% shareholding to Scheduled Caste entrepreneurs/ members/ promoters/ with management control of six months.
Individual SC entrepreneurs are eligible for a guarantee cover of a loan amount up to Rs. 1 Crore.
No Schedule Caste promoters/ partners/ society members should dilute their stake below 51% in the company/ enterprise during the currency of the loan.
To be eligible for Guarantee Cover under the scheme, the FIs/ banks/ MLIs have to submit to the IFCI a copy of the valid sanction letters/ LoI issued to Scheduled Caste beneficiary/ enterprise/ company/ firm/ society/ sole proprietorship firms/ individuals. To save time, the information could be submitted in the web portal of CEGSSC. The indicative Appraisal Format and Due Diligence Module are furnished in as Annexure-III and Annexure -IV. Therefore, the MLIs who have already developed their formats and modules are free to use their appraisal formats/ modules.

Amount of Guarantee Cover

Parameters	Rs.0.15 to Rs. 1	Rs. 1 to Rs. 2	Rs. 2 to Rs. 5	More than Rs. 5
Amount of Guarantee Cover	100% of the sanctioned facility	80% of the sanctioned facility	70% of the sanctioned facility	60% of the sanctioned facility
Guarantee Obligation	100% of the amount in default subject to a maximum of amount of guarantee cover	80% of the amount in default subject to a maximum of amount of guarantee cover	70% of the amount in default subject to a maximum of amount of guarantee cover	60% of the amount in default subject to a maximum of amount of guarantee cover
Minimum cover available	0.15	1	1.60C	3.50
Maximum cover available	1	1.60	3.50	5

Sector covered under Scheme

The borrower engaged in primary/ service/ manufacturing sector would be considered for financial assistance by MLIs.

Type of Borrower

Registered companies/ registered partnership firms having more than 51% shareholdings with Scheduled Caste promoters for the past six months having management control of the SC entrepreneurs/ promoters.
Society registered under the Society Act and carrying business in accordance with the general policy of Bank/ FIs, having above 51% shareholdings with Scheduled Caste members at least for six months having management control of the SC entrepreneurs/ promoters.
Sole Proprietorship firms of SC entrepreneurs/ individual SC entrepreneurs.
- The Scheduled Caste promoters of companies are given preference ahead of the Registered partnership firms and Registered Societies.
- The Scheduled Caste promoter/ partner/ members will not dilute his/ her/ their shareholding/ equity during the currency of the loan.

Amount of Guarantee

A maximum amount of Rs.5 Crore would be considered as the amount of guarantee.

Tenure of Guarantee

A maximum of seven years or the repayment period, whichever is earlier.

Repeat Credit Enhancement

In case of satisfactory track record and post-liquidation of the first facility as per the scheme, the merits of Guarantee under the scheme would be extended to such SC entrepreneurs/ Enterprises for repeat finance to incentivise and inculcate healthy credit culture amongst the ultimate beneficiaries.

Lock-in Period

The guarantee cover has a lock-in period of 10 months from the date of the last disbursement. No claim that is made under the guarantee will be entertained by IFCI if the account becomes NPA within the lock-in period.