CGTSI/ (44)/1094

December 12, 2002

All Member Lending Institutions (MLIs) of CGTSI

Circular No. 8/2002-03

Dear Sir / Madam,

Credit Guarantee Scheme (CGFSI) - Minimum credit limit for Guarantee Cover

As you may be aware the Credit Guarantee Scheme (CGFSI) is in operation since August 2000. Presently, the Trust is covering eligible credit facilities extended by its Member Lending Institutions (MLIs) up to Rs.25lakh in respect of a single eligible borrower without any prescription for minimum threshold limit for the eligible credit.

In terms of CircularRPCD/PLNFS/No.BC.58/06.02.80/2001-02 dated January 23, 2002, the RBI has issued directive to all Scheduled Commercial Banks (including RRBs) that exemption limit of borrowal accounts for obtention of collateral securities raised fromRs.1 lakh to Rs.5 lakh for the tiny sector is applicable to all SSI units. In the light of extant directive of the RBI,the need for prescribing minimum threshold limit for guarantee cover has been reviewed. Accordingly, it has been decided that e ffective February 01,2003,guarantee cover of the CGTSI shall be available for eligible collateral free credits over Rs.5 lakh and up to Rs.25 lakh, extended by its MLIs to eligible SSI borrowers.

The existing and modified provisions in respect of Clause 4 in Chapter II on "Scope and Extent of the Scheme " are given below:-

Existing Provision

Modified Provision

"The Trust shall cover credit facilities extended by eligible lending institution(s) in respect of a single eligible borrower not exceeding Rs. 25 lakh, by way of term loan and / or working capital facilities on or after entering into an agreement with the Trust, to the small scale industrial units including information technology and software industries, without any collateral security and / or third party guarantees."

"The Trust shall cover credit facilities extended by eligible lending institution(s) in respect of a single eligible borrower for credit above Rs. 5 lakh and not exceeding Rs. 25lakh, by way of term loan and / or working capital facilities on or after entering into an agreement with the Trust, to the small scale industrial units including information technology and software industries, without any collateral security and / or third party guarantees."

The aforesaid modification in the Credit Guarantee Scheme is applicable for all the eligible credit proposals sanctioned by MLIs on or after February 01, 2003.

We request you to please bring the modification in the Guarantee Scheme to the notice of all your Zonal / Regional / Branch offices

Thanking you,

Yours faithfully,

Sd/-

   (N. Venkatasubramanyan)

Chief Executive Officer