Meaning of Credit Guarantee
Credit guarantee is the guarantee that often provides for a specific remedy to creditor if his debtor does not return his debt. For getting credit guarantee facility, creditor can take credit insurance policy for covering the risk of bad debt under risk management. Credit guarantee is very helpful to avoid the fear of non payment. In case customer becomes insolvent or bankrupt, creditor can demand same amount from the company who gave credit guarantee.
Credit Guarantee in India
In India, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was established by Govt. of India. It provides credit guarantee facility to Indian financial and banking companies. In the coming years, CGTMSE would continue to strive relentlessly to bring about a transformation in banks' lending to MSEs by providing overwhelming support and incorporating confidence building measures in its operations to make collateral-free lending to MSEs the most preferred and profitable option. The coverage under Credit Guarantee Scheme (CGS) had crossed the one lakh mark in June 2008, followed by the highest coverage during a single year of 53,708 guarantee approvals and cumulatively achieving coverage of 1,50,034 proposals for Rs.4824.34 as March 31,2009". One of the major objectives of the CGTMSE would be to facilitate securitisation of the loans guaranteed by the Trust. Keeping in view the securitisation models operated by the Small Business Administration of USA and in other developed countries, the Trust would endeavor to facilitate securitisation of guaranteed loans in a big way with the facility to investors for trading these securities in the secondary debt markets.
Credit guarantee is the guarantee that often provides for a specific remedy to creditor if his debtor does not return his debt. For getting credit guarantee facility, creditor can take credit insurance policy for covering the risk of bad debt under risk management. Credit guarantee is very helpful to avoid the fear of non payment. In case customer becomes insolvent or bankrupt, creditor can demand same amount from the company who gave credit guarantee.
Credit Guarantee in India
In India, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) was established by Govt. of India. It provides credit guarantee facility to Indian financial and banking companies. In the coming years, CGTMSE would continue to strive relentlessly to bring about a transformation in banks' lending to MSEs by providing overwhelming support and incorporating confidence building measures in its operations to make collateral-free lending to MSEs the most preferred and profitable option. The coverage under Credit Guarantee Scheme (CGS) had crossed the one lakh mark in June 2008, followed by the highest coverage during a single year of 53,708 guarantee approvals and cumulatively achieving coverage of 1,50,034 proposals for Rs.4824.34 as March 31,2009". One of the major objectives of the CGTMSE would be to facilitate securitisation of the loans guaranteed by the Trust. Keeping in view the securitisation models operated by the Small Business Administration of USA and in other developed countries, the Trust would endeavor to facilitate securitisation of guaranteed loans in a big way with the facility to investors for trading these securities in the secondary debt markets.
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