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MUTUAL CREDIT GUARANTEE SCHEME FIRST MEETING OF THE INDO-ITALIAN JOINT WORKING GROUP
New Delhi ~ July 11, 2001
The first meeting of the Indo-Italian Joint Working Group (JWG) formed for exploring possibility of implementing the Mutual Credit Guarantee Scheme in India based on the Italian model was held here today. The Indian team was led by Shri.S.K.Tuteja Additional Secretary & Development Commissioner (SSI) Ministry of SSI&ARI while the Italian team was lead by Mr.Rosario Alessandrello President
Technimont Spa. Credit Guarantee Fund Trust for Small Industries (CGTSI) has been appointed as the nodal agency to implement the Mutual Credit Guarantee Scheme. The JWG was formed for giving effect to the MOU signed on October 17 2000 at Delhi between Ministry of Small Scale Industries and Agro & Rural Industries of India and Ministry of Industry Commerce and Handicraft of the Italian Republic. Minster of SSI & ARI Smt. Vasundhara Raje signed the MOU from the Indian side. The objectives of the MOU are promotion of Credit Guarantee Schemes in India and institutional capacity building for the development of small and medium sized enterprises in India. While the existing credit guarantee scheme operated by CGTSI would help the lending institutions to extend credit facilities up to Rs. 25 lakh to SSIs without the hassles of collateral security the question of
containing or minimizing the default rate is still to be addressed particularly in the context of the drawbacks of the current appraisal and monitoring system being followed by the banks in the country. CGTSI doesn't undertake reappraisal of the proposals received by it from its MLIs for coverage under the guarantee scheme. However the Mutual Credit Guarantee as prevalent in Italy and certain other countries of Europe provides for extension of credit guarantee to the banks by the Mutual Guarantee Funds on behalf of the small and medium sized industrial units. The Mutual Guarantee Funds on behalf of the small and medium sized industrial units. The Mutual Guarantee Funds which are known as `CONFIDI' in Italy are
association of the industrial units themselves floated for the purpose of facilitating credit flow to the small and medium sized units by guaranteeing the credit facility extended by the banks. The CONFIDI system has several advantages over the conventional guarantee schemes run by the governments world over to promote credit flow to small industrial units. The advantages are numerous viz. lower default rates comforts to banks in the form of credit guarantee from CONFIDI improvement in asset quality and concession in interest rate for borrowers coupled with comfortable terms of credit.
In view of the above merits of Mutual Credit Guarantee Scheme it is being considered to implement the scheme in India on pilot basis in close cooperation with certain proactive industry associations like Karnataka Small Scale Industries Association (KASSIA) Association of Lady
Entrepreneurs of Andhra pradesh (ALEAP) etc. On successful implementation of the pilot projects the scheme will be replicated in other parts of the country on bigger scale.
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