CGTSI/(44)/368                                                                                                                                                                      July 03, 2003

The Head Offices of all the Member Lending Institutions of CGTSI

Circular No. 11/ 2003-04

Dear Sir / Madam,

Credit Guarantee Fund Scheme for Small Industries (CGFSI) - Procedure
for invocation of guarantee and preferment of claim

1. After becoming the Member Lending Institution (MLI) of CGTSI, the eligible banks / other lending institutions have been seeking guarantee cover in respect of eligible credit facilities extended by them to the eligible SSI borrowers without taking any collateral security / Third Party Guarantee. On receipt of guarantee fee in the account of CGTSI, the guarantee cover commences from the date of credit. Further, for continuance of guarantee cover issued by the Trust, the MLI has to pay annual service fee at specified rate (currently 1% p.a.) on the outstanding balance to the debit of the borrower's account as on March 31 of each year, by May 31 of every year.

2. In case of default of the credit facility extended by the MLI to the eligible borrower and covered under CGFSI, the MLI may Invoke the Guarantee and prefer a claim on CGTSI, if the following conditions as stipulated under Clause 10 (i), under Chapter V of CGFSI are satisfied:

.  The guarantee in respect of that credit facility is in force;

.  The lock-in period of 24 months from either the date of last disbursement of the loan to the borrower or the date of payment of the guarantee fee in respect of credit facility to the borrower, whichever is later, has elapsed;

.  The amount due and payable to the lending institution in respect of the credit facility has not been paid and the dues have been classified by the lending institution as Non Performing Assets. Provided that the lending institution shall not make or be entitled to make any claim on the Trust in respect of the said credit facility if the loss in respect of the said credit facility had occurred owing to actions / decisions taken contrary to or in contravention of the guidelines issued by the Trust;

.  The loan facility has been recalled and the recovery proceedings have been initiated under the due process of law.

3. The MLI should prefer / lodge the claim in the prescribed format (as per Annexure I ) ( Excel file ) latest by the end of calendar quarter subsequent to the quarter in which all the conditions for preferment of claim, as mentioned above, are met by the MLI. The claim form may be downloaded from the website of the Trust ( www.cgtsi.org.in ) for submission in soft copy.

The guarantee claim, complete in all respects alongwith enclosures, have to be lodged on floppy diskette (1.44 MB) with forwarding letter (as per Annexure II ) through the Nodal officer of the respective Operating Office of the MLI.

The guarantee claims received directly from the branches or offices other than respective Operating Offices of MLIs will not be entertained.

CGTSI is in the process of completing the second phase of development of the software to render better service to its customers. As soon as the software is ready, we will advise the MLIs to prefer the claims through internet. The facility of ThinClient software would also be made available for this purpose.

Please bring the above to the notice of all your Operating Offices.

Yours faithfully,

(N. Venkatasubramanyan)

Chief Executive Officer

 

Annexure - II

To be given on the letter head of Operating Office of MLI

Ref. No. Date

The Deputy General Manager

Credit Guarantee Fund Scheme for Small Industries

12 th Floor, Nariman Bhavan,
227, Vinay K. Shah Marg,
Nariman Point, Mumbai - 400 021.

Dear Sir,

Credit Guarantee Scheme (CGFSI) - Application for Invocation of Guarantee & preferment of Claim

In terms of Clause 10, Chapter V of Credit Guarantee Scheme (CGFSI), we hereby invoke the guarantee in respect of the credit facilities extended to the SSI borrower unit(s) against which the guarantee(s) had been issued by CGTSI. The name(s) of borrower(s), CGPANs and the amount claimed are as under -

SN

Name of SSI borrower/Unit

CGPAN

Amount claimed (In Rs.)

The guarantee claim on Floppy (1.44 MB), complete in all respects alongwith the certified copies of documents in support of the claim, are forwarded herewith for settlement of the claim(s). The copy of Declaration & Undertaking, duly signed by the authorized official is forwarded herewith as Annexure.

Thanking you,

Yours faithfully,

Signature:

Name of the Nodal Officer:

User Id:

Member Id of Op. Office of MLI:

Encl.: As above

Annexure

Declaration and Undertaking by MLI

Declaration - We declare that the information given above is true and correct in every respect. We further declare that there has been no fault or negligence on the part of the MLI or any of its officers in conducting the account. We also declare that the officer preferring the claim on behalf of MLI is having the authority to do so.

We hereby declare that no fault or negligence has been pointed by auditors/ inspection department

Undertaking- We hereby undertake:

a) To pursue all recovery steps including legal proceedings

b) To report to CGTSI the position of outstanding dues from the borrower on half-yearly basis as on 31st March and 30th September of each year till final settlement of guarantee claim by CGTSI.

c) To refund to CGTSI the claim paid amount along with interest thereof at 4%over and above the prevailing Bank Rate, if in the view of CGTSI we have failed or neglected to take any actions for recovery of the guaranteed debt from the borrower or any other person from whom the amount is to be recovered

d) On payment of claim by CGTSI, to remit to CGTSI, in full, all such recoveries which we or our agents acting on our behalf, may make from the person or persons responsible for the administration of debt, or otherwise, in respect of the debt due from him/them to us.

Signature
Name of the Official
Designation
MLI Name & Seal
Date
Place
Address.
Telephone Number
Fax

1) CGTSI reserves the right to ask for any additional information, if required.

2) CGTSI reserves the right to initiate any appropriate action/appoint any person/institution etc. to verify the facts as mentioned above and if found contrary to the declaration, reserves the right to treat the submission invalid.