Credit Guarantee Fund (CGF) and Interest Subvention Scheme (ISS)

Credit Guarantee Fund (CGF) and Interest Subvention Scheme (ISS) Launched In India for Electronic Manufacturers 2019

Recently, the central government took the decision to implement two new schemes, which have been targeted towards the development of electronic manufacturing industry. The first scheme is called the Credit Guarantee Fund (CGF), while the second is named Interest Subvention Scheme (ISS). These two have been designed and developed by the Ministry of Electronics and Information Technology. These two schemes are the result of the operation of National Policy on Electronics in the nation.

Prime Minister Modi declared that he will install necessary measures to make his “Make in India” campaign a success. Reports suggest that every year India imports a high percentage of electronic goods from countries like China and Japan. With “Make in India” movement this tendency will lower significantly.  

Interest Subvention Scheme

Credit Guarantee Fund or CGF

With the advancement of technology in India, the want for electronic goods has increased tremendously.  With the development of the National Policy on Electronics, the central government wants to tap into the vast revenue generating opportunity. The new schemes will also create the correct platform for the development of electronic good manufacturing organizations.

In this regards, comes the Credit Guarantee Fund or the CGF scheme. This project highlights that the central authority will offer companies sufficient guarantee coverage. Under this unique policy, eligible electronic good manufacturing organizations will receive 50% coverage.  However, the value of the project must be at least Rs. 100 crore to attain this coverage benefit.

Under this scheme, the owners of electronic manufacturing organizations will no longer have to worry about arranging collateral securities. Apart from this, there will not be any requirement for 3rd party granters. Whether the owner wants to establish a new company, or expand an already existing base,  under this unique policy, eligible electronic good manufacturing organizations will receive 50% coverage

It will be the responsibility of the Ministry of Electronics and Information Technology to create this fund. Once the fund has been created, it will allocate necessary budget. The central authority will transfer a whopping Rs. 1,000 crore in this fund. It is safe to opine that all manufacturing agencies, which fulfill necessary criterion, will receive within 50% assured coverage. The exact percentage will depend on some other factors as well. The central authority will have the final say about this coverage percentage.

Interest Subvention Scheme or ISS

Whenever any company attains loan from a government or private enterprise, it has to pay a certain interest that is calculated on the loan amount. For manufacturing organizations, the rate of interest is rather high. It is another reason that mars the proper development of electronic good manufacturing companies in India. The interest rates, in other nations, are as low as 5% to 7%. The same goes up to around 12% on Indian soli. To level this disparity, and encourage electronic manufacturing companies, the central government will implement the Interest Subvention Scheme or ISS. With the implementation of this scheme, the authority will compensate for the high rates on term credit. It will be available for credit issued for attaining machinery or establishment of factory.

This project will take into account all the different elements of production. Acquisition of raw materials, assembly, manufacturing, testing the items, packing and transportation will fall in this list. If the amount of term loan is Rs. 1000 crore and has been borrowed for at least 10 ten years, then the organization will attain the benefits.

If the credit amount is more than the specified sum, the owner of the organization can still apply under the ISS guidelines. But the central government will not calculate the subsidy on the extra loan amount. The subsidy will be limited to the Rs. 1000 crore mark. It is not possible for any manufacturing agency to repay the credit in a single go. Thus, adequate opportunities for installment based payments are available. Under such circumstances too, the benefit of attaining subsidy will persist.  

Reimbursement on loan interests will pave the path for the establishment of many new electronic gadget manufacturing companies. Even organizations, with low capital investment will be encouraged to take the step forward. Lack of proper platform will mar the development of electronic manufacturing sector in India. The central government must implement similar policies, which make it easy for companies to operate and generate revenue.

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