CGTSI/(44)/1663

March 12, 2007

All Member Lending Institutions of CGTSI

Circular No. 35 / 2006-07

Differential Pricing based on slab of Coverage

Based on representations received from various quarters, it has been decided to give the MLIs a greater extent of freedom in determining the extent of coverage actually required by them. A schedule of differential pricing mechanism has been drawn to allow the MLIs the freedom to go in for lower guarantee coverage as per their risk perception. The coverage structure based pro-rata on the extent of coverage/fee structure of CGTSI is given below:

Extent of Guarantee Coverage (%) of Credit

Facility Sanctioned

One time Guarantee Fee

(%) of Credit Facility

Sanctioned

Annual Service Fee

(%) of Credit Facility Sanctioned

75

1.50

0.75

60

1.20

0.60

50

1.00

0.50

40

0.80

0.40

30

0.60

0.30

Applications under the above scheme may be lodged by the MLI in hard copy only , until a separate module for the same is incorporated in CGTSI's enterprise wide software. The application form that is being filled up for lodging all other cases may be used for the purpose. The MLIs should clearly indicate the extent of Guarantee cover required to enable us to arrive at the guarantee fee and annual service fee. The fees should be sent to CGTSI only upon the receipt of Demand Advice Number from CGTSI.

The relevant sections of the original scheme stand modified as per the details given below:

Section 2(V)

'Guarantee Cover' means maximum cover available per eligible borrower which shall not exceed 75 per cent of the amount in default in respect of credit facility extended by the lending institution, subject to maximum of Rs. 18.75 lakh (Rupees eighteen lakh seventy five thousand only); provided further that the 'Guarantee Cover' would be on proportionate basis in respect of the product for 'Differential Pricing based on slab of coverage' as specified by the Trust.

Section 8(i)

A one time guarantee fee at specified rate (currently 1.5 per cent) of the credit facility sanctioned, (comprising term loan and / or working capital facility) shall be paid upfront to the Trust by the eligible institution availing of the guarantee within 30 days from the date of first disbursement of credit facility; provided further that the guarantee fee would be paid on a pro-rata basis in respect of the product for 'Differential Pricing based on slab of coverage' as specified by the Trust.

Section 8(ii)(Part)

The Annual Service Fee at specified rate (currently at 0.75% p.a.) on the amount of credit facility extended by the MLI, which is covered under the scheme and in respect of which guarantee fee has been paid as on March 31 shall be paid by the lending institution within 60 days i.e. May 31 of every year; provided further that the Annual Service Fee would be paid on a pro-rata basis in respect of the product for 'Differential Pricing based on slab of coverage' as specified by the Trust.

Section 9 (Part)

The Trust shall provide guarantee cover of up to 75% of the amount in default of the credit facility extended by the lending institution to an eligible borrower, subject to a maximum guarantee cover of Rs. 18.75 lakh (Rupees eighteen lakh seventy five thousand only) per borrower; provided further that the 'Guarantee Cover' would be on proportionate basis in respect of the product for 'Differential Pricing based on slab of coverage' as specified by the Trust"

You are requested to advise your operating offices (Zonal / Branch Offices) about the modification made to the Scheme as above. We solicit your cooperation in covering maximum proposals under the Scheme.

Yours faithfully,

Sd/-

(P.M.Radhakrishnan)

Deputy General Manager