CGTMSE/(44)/                                                                                  October 20, 2009

           

 

 

All Member Lending Institutions

 

 

Circular No. 56/2009-10

 

Madam / Dear Sir,

 

 

Modifications to the Credit Guarantee Scheme (CGS)

 

 

With the increase in guarantee limit to Rs.100 lakh per borrower and based on feedback on operational aspects of Credit Guarantee Scheme (CGS) received from users, it has been decided to modify the CGS to bring greater clarity to certain provisions of the Scheme and make it more acceptable to the Member Lending Institutions (MLIs). The existing and modified provisions of the Scheme are given at Annexure and will be applicable from the date of this Circular.

 

2.         Please bring the contents of the circular to the notice of all the operating offices of your Bank / Institution.

 

Yours faithfully,

 

 

Sd/-

 

(P.M. Radhakrishnan)

Encls : as above                                                                 Deputy General Manager

 

 


Annexure

 

 

SNo.

Existing Provision

Modified Provision

1

Definition of "Amount in Default" means the principal and interest amount outstanding in the account(s) of the borrower in respect of term loan and amount of outstanding working capital facilities (including interest), subject to a maximum of fund based & non-fund based working capital limits sanctioned and guaranteed as on the date of the account becoming NPA, or such of the date as may be specified by CGTMSE, for preferring any claim against the guarantee cover.

Definition of "Amount in Default" means the principal and interest amount outstanding in the account(s) of the borrower in respect of term loan and amount of outstanding working capital facilities (including interest) as on the date of the account becoming NPA or the date of lodgment of claim application whichever is lower or such of the date as may be specified by CGTMSE for preferring any claim against the guarantee cover subject to a maximum of amount Guaranteed.

2

Definition of "Primary Security" in respect of a credit facility shall mean the assets created out of the credit facility so extended and/or which are directly associated with the project or business for which the credit facility has been extended.

Definition of "Primary Security" in respect of a credit facility shall mean the assets created out of the credit facility so extended and/or existing unencumbered assets which are directly associated with the project or business for which the credit facility has been extended.

3

Definition of "Tenure of Guarantee Cover" means the maximum period of guarantee cover which shall run through the agreed tenure of the term credit and for a period of 5 years or block of a 5 years where working capital facilities alone are extended, or for such period as may be specified by the Trust

Definition of "Tenure of Guarantee Cover" means the maximum period of guarantee cover from Guarantee start date which shall run through the agreed tenure of the term credit and for a period of 5 years or block of a 5 years where working capital facilities alone are extended or loan termination date, which ever is earlier or such period as may be specified by the Trust.

4

Point No. 4 of Chapter II -

Credit facilities eligible under the Scheme:

The Trust shall cover credit facilities (Fund based and/or Non fund based) extended by Member Lending Institution(s) to a single eligible borrower in the Micro and Small Enterprises sector for credit facility (i) not exceeding Rs. 50 lakh (Regional Rural Banks/Financial Institutions) and (ii) not exceeding Rs.100 lakh (Scheduled Commercial Banks and select Financial Institutions) by way of term loan and/or working capital facilities on or after entering into an agreement with the Trust, without any collateral security and / or third party guarantees.

Credit facilities eligible under the Scheme:

The Trust shall cover credit facilities (Fund based and/or Non fund based) extended by Member Lending Institution(s) to a single eligible borrower in the Micro and Small Enterprises sector for credit facility (i) not exceeding Rs. 50 lakh (Regional Rural Banks/Financial Institutions) and (ii) not exceeding Rs.100 lakh (Scheduled Commercial Banks and select Financial Institutions) by way of term loan and/or working capital facilities on or after entering into an agreement with the Trust, without any collateral security and\or third party guarantees or such amount as may be decided by the Trust from time to time.

5

New Para 2 Point No. 4 in Chapter 2

Credit facilities extended by more than one bank and/or financial institution jointly and/or separately to eligible borrower upto a maximum upto Rs.100 lakh per borrower subject to ceiling amount of individual MLI or such amount as may be specified by the Trust.

6

Point No.5. VII of Chapter 2- (vii) Credit facilities extended jointly by two or more banks to a single borrower or credit facilities extended jointly by two or more institutions to a single borrower, shall not be eligible for guarantee cover. However, CGTMSE shall provide guarantee cover in respect of the credit facility financed jointly by a bank with SIDBI, out of the Micro and Small Enterprises (MSE) Fund for North Eastern Region (NER) created by SIDBI, subject to the following conditions:

 

1. The modification of CGS would be applicable to units covered under SIDBI's "Micro and Small Enterprises Fund for North East Region (NER)" of Rs. 10 crore under co-financing arrangement with banks for a maximum term credit facility of Rs.50 lakh.

2. The co-financed cases shall be lodged for guarantee cover by the co-financing bank for the entire credit facility extended by both the co-financing bank and SIDBI.

3. The co-financing bank shall ensure that all other norms of CGS have been complied with by SIDBI and the co-financing bank before lodging the application for guarantee cover with CGTMSE.

4. The maintenance of guarantee cover i.e, payment of guarantee fee / service fee / lodgment of claim application, etc. shall be the responsibility of the co-financing bank.

The eligible claim amount shall be paid to the co-financing bank and it shall be the responsibility of the co-financing bank to share the claim proceeds with SIDBI.

The point is deleted

7

Para 1, point No.8 of Chapter 3:- "one time guarantee fee at specified rate ((a)currently 1.00% in the case of credit facility upto Rs. 5 Lakh and 1.5% in the case of credit facility above Rs. 5 Lakh (b) 0.75%, in case of credit facilities upto Rs.50 lakh sanctioned to units in North Eastern Region including State of Sikkim) of the credit facility sanctioned (comprising term loan and / or working capital facility) shall be paid upfront to the Trust by the institution availing of the guarantee within 30 days from the date of first disbursement of credit facility or 30 days from the date of Demand Advice (CGDAN) of guarantee fee whichever is later."

"One-time guarantee fee at specified rate ((a)currently 1.00% in the case of credit facility upto Rs. 5 Lakh and 1.5% in the case of credit facility above Rs. 5 Lakh (b) 0.75%, in case of credit facilities upto Rs.50 lakh sanctioned to units in North Eastern Region including State of Sikkim) of the credit facility sanctioned (comprising term loan and / or working capital facility) shall be paid upfront to the Trust by the institution availing of the guarantee within 30 days from the date of first disbursement of credit facility (not applicable for Working capital) or 30 days from the date of Demand Advice (CGDAN) of guarantee fee whichever is later or such date as specified by the Trust .

8

Para II, point No.8 of Chapter 3 :- The annual service fee at specified rate (currently 0.50% in the case of credit facility upto Rs. 5 Lakh and 0.75% in the case of credit facility above Rs. 5 Lakh) of the credit facility sanctioned (comprising term loan and / or working capital facility) shall be paid by the lending institution within 60 days ie. on or before May 31, of every year. In the event of non-payment of annual service fee by May 31 of that year or any other specified date, the guarantee under the scheme shall not be available to the lending institution unless the Trust agrees for continuance of guarantee and the lending institution pays penal interest on the service fee due and unpaid, with effect from the subsequent June 01, at four per cent over Bank Rate, per annum, or at such rates specified by the Trust from time to time, for the period of delay

The annual service fee at specified rate (currently 0.50% in the case of credit facility upto Rs. 5 Lakh and 0.75% in the case of credit facility above Rs. 5 Lakh) on pro-rata basis for the first and last year and in full for the intervening years on the credit facility sanctioned (comprising term loan and / or working capital facility) shall be paid by the lending institution within 60 days ie. on or before May 31, of every year. In the event of non-payment of annual service fee by May 31 of that year or any other specified date, the guarantee under the scheme shall not be available to the lending institution unless the Trust agrees for continuance of guarantee and the lending institution pays penal interest on the service fee due and unpaid, with effect from the subsequent June 01, at four per cent over Bank Rate, per annum, or at such rates specified by the Trust from time to time, for the period of delay.

9

Para I, point No.10 of Chapter 5 :- The lending institution may invoke the guarantee in respect of eligible credit facility if the following conditions are satisfied: -

The lending institution may invoke the guarantee in respect of credit facility within a maximum period of one year from date of NPA, if NPA is after lock-in period or within one year of lock-in period, if NPA is within lock-in period, if the following conditions are satisfied: -

10

Point. a of para I , point No.10 of Chapter 5 :- The guarantee in respect of that credit facility is in force

The guarantee in respect of that credit facility was in force at the time of account turning NPA.