December  17, 2013



All the Member Lending Institutions of CGTMSE



Kind Attn.: Head, SME/Priority Sector Dept.


Circular No.   71/2013-14


Madam / Dear Sir,


Modifications in the Interest Rate Cap under

Credit Guarantee Scheme (CGS) of  CGTMSE


            As you are aware, as per Clause 5 (vi), Chapter I of CGS, any credit facility sanctioned by the Member Lending Institution to any eligible borrower with interest rate more than 3% over the Prime Lending Rate (PLR) of the lending institution, is not eligible to be covered under CGS. However, the said provision needed a relook consequent upon introduction of "Base Rate" linked lending by the Banks. It has, therefore, been decided to modify the aforesaid Clause of the CGS.


As per the revised Clause, any credit facility which has been sanctioned by MLI, under CGS, to an eligible borrower with interest rate more than 4% over its Base Rate (BR) will not be eligible for coverage under the CGS.  However, in case of those MLIs for whom Reserve Bank of India has not enjoined Base Rate concept, the existing provision of CGS will continue.  The above modifications will come into effect for the guarantees approved by CGTMSE on or after the date of this circular.


The contents of this letter may please be brought to the notice of all your Offices.


 Yours faithfully,




(S.S. Bakshee)

General Manager