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    Question

    Under the CGTMSE (Credit Guarantee Fund Trust for Micro

    and Small Enterprises) scheme, which of the following would be treated as primary security for a loan covered under the guarantee? i. Assets created out of the credit facility extended to the borrower  ii. Unencumbered fixed assets like land, building, plant, or machinery associated with the project  iii. Personal guarantee of the proprietor or partners (in case of proprietary/partnership firm)  iv. Personal guarantee of spouse of the proprietor
    A Only (i) and (ii) Correct Answer Incorrect Answer
    B Only (i) and (iii) Correct Answer Incorrect Answer
    C Only (iii) and (iv) Correct Answer Incorrect Answer
    D (i), (ii), and (iii) Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    • Primary security refers to assets that are directly created out of the loan facility or are associated with the borrower’s business/project. • Examples include: o Assets created out of loan proceeds (plant & machinery, equipment, etc.) o Unencumbered fixed assets like land/building attached to the project o Personal guarantee of proprietor/partners/directors depending on the constitution of the borrower • However, the personal guarantee of spouse, relatives, or friends is considered a third-party guarantee, not primary security. • Under CGTMSE, collateral security is not mandatory, but primary security is required for guarantee coverage.

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