NEW DELHI: The central government on Wednesday said it will augment the corpus of 'Credit Guarantee Trust Fund for Micro and Small Enterprises' (CGTMSE) by an additional 5,000 crore.

The decision to augment the fund was taken during a meeting of the Union Cabinet here held under the chairmanship of Prime Minister Narendra Modi.

According to Finance Minister Arun Jaitley, the approved package envisages augmenting the corpus of CGTMSE by 5,000 crore to a total of 7,500 crore.

The CGTMSE will be fully funded by the central government, Jaitley elaborated during a press briefing held after the cabinet meeting.

"The fund augmentation will lead to an increase in the loan limit under the scheme from 1 crore to 2 crore," Jaitley informed.

The move will also increase the coverage of the credit guarantee scheme for loans being extended to MSMEs by Non-Banking Financial Companies (NBFC).

"Augmentation of the corpus would facilitate larger flow of credit to MSEs. This, in turn, would lead to increased output and employment and thereby promote equity and inclusiveness," an official communique by the Union Cabinet said.

"As the scheme provides credit without collateral and third-party guarantee, the start-ups would be encouraged to set up enterprises based on innovation and new ideas."

Earlier, on December 31, 2016 Prime Minister Modi had announced the enhancement of credit guarantee scheme for the MSME sector for loans up to 2 crore.

"Just as agriculture is vital for the economy, so are the medium and small scale enterprises, also called the MSME sector," the Prime Minister had said that time.

"Government has taken some decisions in the interest of small and medium businesses, which will also boost employment," he said in an address to the nation on New Year's Eve.

Noting that the central government underwrites loans given by banks to small businesses through a trust, he said that loans were covered up to one crore rupees and this limit was now being doubled.

"Earlier the scheme only covered bank loans. Hereafter it will cover loans given by NBFCs as well. This decision will enable better access to credit for small shop-owners and small enterprises," Prime Minister Modi had said.

"Banks and NBFCs will not levy high interest on these loans, as Government of India is bearing the cost of underwriting them," he had said.

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