CGTSI/ (44)/542

                                                           September 4, 2001

All Member Lending Institutions

Circular No. 2 / 2001-02

Dear Sir / Madam,

Modifications in the Credit Guarantee Scheme

With a view to making the Scheme more convenient for its Member Lending Institutions (MLIs), the Trust has carried out certain modifications in the Scheme. The modifications carried out in the Scheme are as follows:

1.    Chapter II - "Scope and Extent of the Scheme", Para 2 of Clause 4 on "Credit facilities eligible under the Scheme":

Existing Provision:

"Provided that the lending institution applies for a guarantee cover within a period of 90 days from the date of sanction".

Modified Provision:

The above portion in Clause 4 has been modified as follows:

"Provided that the lending institution applies for guarantee cover in respect of credit proposals sanctioned in the quarter April-June, July-September, October-December and January-March prior to expiry of the following quarter viz. July-September, October-December, January-March and April-June respectively"

Reasons for modification:

Modification has been carried out to address the problems of MLIs having large branch network. Lead time of one calendar quarter will help in ensuring that all the eligible applications sanctioned by various branches, in the previous quarter, could be scrutinized and submitted by the respective Regional / Zonal Offices to the Trust in the subsequent quarter.

With this modification, MLIs have the facility of submitting applications in respect of sanctions effected in the quarter July - September, 2001, in the next quarter ending December, 2001. Nevertheless, MLIs can continue to file applications to the Trust for guarantee cover as soon as eligible credit facilities are sanctioned by them.

2.   Chapter VI - "Miscellaneous", Clause 17(ii) on "Modifications and Exemptions":

Existing Provision:

"Notwithstanding anything herein contained, the Trust shall have a right to alter the terms and conditions of the Scheme in regard to an account in respect of which guarantee has not been invoked as on the date of such alteration."

Modified Provision:

Clause 17(ii) has been modified with the substitution of word ' issued ' in place of ' invoked ' as follows:

"Notwithstanding anything herein contained, the Trust shall have a right to alter the terms and conditions of the Scheme in regard to an account in respect of which guarantee has not been issued as on the date of such alteration."

Reasons for modifications:

In term of Clause 17(i) of the scheme, the Trust has advised all MLIs that any modifications in the scheme shall have prospective effect not affecting the proposals where guarantee has been issued. Keeping with the spirit of the clause 17(i), clause 17(ii) has been modified so that there is no ambiguity in interpretation.

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 to meet the objective of not denying much needed credit to the eligible SSI units including units in Information Technology / Software industry.

Thanking you,

Yours faithfully,

Sd/-

  (N. Venkatasubramanyan)

Chief Executive Officer