CGTMSE/(44)/5012                                  October 10, 2012

           

 

 

All Member Lending Institutions of CGTMSE

 

 

Circular No. 62/2012-13

 

Madam / Dear Sir,

 

 

Modifications to the Credit Guarantee Scheme (CGS)

 

 

Based on the recommendations of the RBI Working Group to Review the Credit Guarantee Scheme (CGS) of CGTMSE as also suggestions received from other stakeholders, it has been decided to modify the CGS to bring greater clarity to certain provisions of the Scheme.  The existing and modified provisions of the Scheme are given at Annexure.  The modifications shall be applicable to credit facilities sanctioned by Member Lending Institutions (MLIs) on or after January 01, 2013.

 

2.         We request you to kindly bring the contents of this Circular to the notice of all the operating offices / branches of your Bank / Institution.

 

Yours faithfully,

 

 

Sd/-

 (S.S. Bakshee)

General Manager

 

 


Annexure

 

 SNo

Existing Provision

Modified Provision

2 (xvi)

New provision being inserted under Chapter-I, SNo.2 (xvi)

"Third Party Guarantee" means any guarantee obtained by a Member Lending Institution in connection with the credit facility extended by it to a borrower except from Sole-Proprietor in case of Sole Proprietory concern, Partners in case of partnership / limited liability partnership, Trustees in case of Trust, Karta & Coparceners in case of HUF and promoter directors in case of private/ public limited companies.

8

Guarantee Fee and Annual Service Fee

 

(i)            One-time guarantee fee at specified rate ((a)currently 1.00% in the case of credit facility uptoRs. 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.

             (ii)            The annual service fee at specified rate (currently 0.50% in the case of credit facility uptoRs. 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.

 

Composite all-in Guarantee Fee as under :-

 

Credit Facility

Annual Guarantee Fee (AGF) [% p.a.]

Women, Micro Enterprises and units in North East Region (incl. Sikkim)

Others

Upto Rs.5 lakh

0.75

1.00

Above Rs.5 lakh and upto Rs.100 lakh

0.85

1.00

of sanctioned credit facility shall be paid upfront to the Trust by the institution availing of the guarantee cover within such period as may be specified by the Trust.

In the event of non-payment fee by the MLI within such period 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 fee due and unpaid, with effect from the due date, 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.

10 (i)

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: -

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

10(i)(e)

New provision being inserted under Chapter-V, SNo.10(i)(e)

However, initiation of legal proceedings as a pre-condition for invoking of guarantees shall be  waived for credit facilities upto Rs.50,000/-, subject to the condition that for all such cases, where the filing of legal proceedings is waived, an Executive Committee of the Member Lending Institution (MLI) headed by an Officer not below the rank of General Manager should examine all such accounts and take a decision for not initiating legal action and filing claim under the Scheme.

10 (iii)

The Trust shall pay 75 per cent of the guaranteed amount on preferring of eligible claim by the lending institution, within 30 days, subject to the claim being otherwise found in order and complete in all respects. The Trust shall pay to the lending institution interest on the eligible claim amount at the prevailing Bank Rate for the period of delay beyond 30 days. The balance 25 per cent of the guaranteed amount will be paid on conclusion of recovery proceedings by the lending institution.  On a claim being paid, the Trust shall be deemed to have been discharged from all its liabilities on account of the guarantee in force in respect of the borrower concerned.

The Trust shall pay 75 per cent of the guaranteed amount on preferring of eligible claim by the lending institution, within 30 days, subject to the claim being otherwise found in order and complete in all respects. The Trust shall pay to the lending institution interest on the eligible claim amount at the prevailing Bank Rate for the period of delay beyond 30 days. The balance 25 per cent of the guaranteed amount will be paid on conclusion of recovery proceedings by the lending institution or after three years of obtention of decree of recovery, whichever is earlier.  On a claim being paid, the Trust shall be deemed to have been discharged from all its liabilities on account of the guarantee in force in respect of the borrower concerned. MLIs, however, should undertake to refund any amount received from the unit after payment of full guaranteed amount by CGTMSE.